Refi Guide for Mortgage Refinancing – Find Lenders & Morehttps://www.refiguide.org
Sat, 17 Feb 2018 03:24:03 +0000en-UShourly1https://wordpress.org/?v=4.9.31193410608 Easy Ways to Save Money Refinancing Your Mortgagehttps://www.refiguide.org/how-save-money-refinancing-mortgage
https://www.refiguide.org/how-save-money-refinancing-mortgage#respondTue, 13 Feb 2018 21:18:05 +0000https://www.refiguide.org/?p=3287Are you considering a refinance of your mortgage? Interest rates are very low in 2018 but could rise soon, so now may be the time to apply for a refinance mortgage. If you are considering a home refinance, you will want to save as much money as you can to make the process worth it.… Read More »

]]>Are you considering a refinance of your mortgage? Interest rates are very low in 2018 but could rise soon, so now may be the time to apply for a refinance mortgage. If you are considering a home refinance, you will want to save as much money as you can to make the process worth it. Below are some easy tips to save money when you refinance your home loan in 2018.

#1 Know the Amount You Owe on Your Mortgage

Before you sign off on a mortgage refinance application, carefully review the terms and balance of your current mortgage. This will help you to decide how much you can save when you are looking at new mortgage rates, the total payoff with your mortgage lender, and any fees and closing costs you need to pay. Being familiar with the details of your current loan will make you more knowledgeable as you negotiate a new mortgage, and this will help you save money.

#2 Check Your FICO Score

If your credit score has gotten better since you got your first mortgage, you may be able to save money on your refinance interest rate. Lower rates tend to go to borrowers with the highest credit scores. If you have an FHA mortgage, your credit score may not affect your rate that much, but you still can save significantly on mortgage insurance if you need it; this is a requirement for many FHA loans.

Go over your credit history by getting a complimentary report online, with a simple Google search. This is the official federal government website that has been established. You are entitled to a single credit report per year. After that, you may want to pay for more credit reports from the other credit bureaus. There are three credit bureaus and your score can vary significantly.

Note that many credit card companies now offer free FICO scores for their customers, but these services are now always accurate and up to date with their information.

#3 Do Not Take on New Debt

If your FICO score looks good, it is important to not take on more credit card debt. If anything, we advise saving as much cash as you can and pay down debt as much as possible. The less debt you have, the better your credit score. And the more likely you will be approved for a loan.

Also, do not even make inquiries to open new credit accounts while you are going through the loan approval process. Each inquiry on your credit report will lower your score by several points.

#4 Talk to Several Refinance Lenders

Mortgage research has shown that borrowers save the most on their refinance when they get quotes from at least three mortgage lenders. For example, the Consumer Financial Protection Bureau found that nearly 50% of consumers only get a quote from a single lender when getting a new loan. You could easily pay thousands more in interest and fees by only getting one refinance quote.

#5 Get Rid of Mortgage Insurance

If you made a down payment of less than 20% of your mortgage, you are probably paying monthly mortgage insurance. This is a program that shields the lender from financial consequences if you default. If you do not pay the loan, the lender will be reimbursed part of the loan principal.

It is possible your home appreciated to give you sufficient equity so you do not need mortgage insurance. But bear in mind that not all lenders will end your mortgage insurance unless the loan falls to 78% of the price you paid for the home, or the midway point of paying off the loan.

When you refinance, you might be able to dump mortgage insurance or at least reduce the payments. If you have an FHA loan, you will probably not be able to get rid of PMI at all until the 11th year of the loan if you made a 10% down payment. If you made a 3.5% down payment, you may not be able to cancel mortgage insurance at all.

#6 Don’t Pull Out Cash

Many refinances involve pulling out equity, but we encourage you to resist the temptation. When you are raiding the equity in your home, this can present problems if home values start to go down. You also will have a higher mortgage balance and a higher payment usually. The last thing you want is to owe more on the home than it is worth. If you do not pay the mortgage, you will lose your home. Another problem is when you want to move, you may find you have almost no equity or negative equity in the home. This will prevent you from selling the home or make it very difficult to do so.

#7 Don’t Extend the Loan Term

Yes, you can lower your payment, but if you make the loan term longer, you are paying thousands more in interest. The end goal when you buy your home is to have it paid off as soon as you can and get rid of interest payments.

#8 Review Your Mortgage Strategy

Everyone’s needs, and situation is different. Look over your mortgage strategy to see if it fits your long term financial goals. If you have an adjustable mortgage, for example, you may want to consider refinancing into a fixed rate product. The economy is doing well in 2018, and that adjustable rate could go up. Or, perhaps you have a fixed rate and want to take advantage of the lower adjustable rates. This might make sense if you are sure you will move before the mortgage adjusts to a new rate.

If you keep these above tips in mind, you should be able to save big on your mortgage refinance in 2018.

]]>https://www.refiguide.org/how-save-money-refinancing-mortgage/feed/03287What Is the First Time Home Buyer Tax Credit in 2018?https://www.refiguide.org/first-time-home-buyer-tax-credit
https://www.refiguide.org/first-time-home-buyer-tax-credit#respondTue, 13 Feb 2018 01:27:28 +0000https://www.refiguide.org/?p=3281First time home buyers who are looking for a tax credit could be thinking of the federal program enacted under President Obama. Unfortunately, that program ended several years ago and the 2018 first time home buyer tax credit does not exist. It was enacted in the aftermath of the last financial crisis to help first… Read More »

]]>First time home buyers who are looking for a tax credit could be thinking of the federal program enacted under President Obama. Unfortunately, that program ended several years ago and the 2018 first time home buyer tax credit does not exist. It was enacted in the aftermath of the last financial crisis to help first time buyers to get into a home of their own.

In 2008, the Housing and Economic Recovery Act created a tax credit that was up to $7,500 for first time home buyers. The year after that, the tax credit was boosted to $8,000. After that year, the legislation was tinkered with several times. Depending upon when you purchased your first home, the credit was possibly a tax credit or an interest free loan to be repaid later.

The tax credit program for first time buyers expired and was not renewed in 2010. A few people who bought homes before 2010 may still claim their credit, but the vast majority of buyers today cannot.

Other Help for First Time Buyers

The federal tax credit for first time buyers may not be available, but don’t think you can’t find help to get into your first home. Many mortgage programs for first time home buyers are offered by states, counties and cities. True, it can take a bit of research to find options in your area, but some of the possibilities include grants (you don’t need to pay them back), zero interest loans and state tax credits.

For instance, in Texas, the Texas State Affordable Housing Corporation has two programs for the first-time buyer. One is for buyers with a lower income and the other is for teachers, firefighters and EMTs, police officers and veterans. These programs offer buyers help with down payments, and buyers also can obtain a mortgage credit certificate; this is a tax credit as much as $2000 based upon how much you pay in mortgage interest annually.

Here are some other programs that could help you as a first-time home buyer.

This program was once called the Teacher Next Door program but was extended in the recent past to include firefighters, police, EMTs, etc. It is sponsored by HUD, and it can get you as much as a 50% discount on the list price of a home in certain urban areas. Yes, you can get as much as 50% off certain homes! Think that would help you to afford your first home? The major requirements are to buy a home in a revitalizing area and to live there for 36 months. You can find available homes at the Good Neighbor Next Door’s official web-site.

These are government-backed but privately-run companies that work with many local lenders in most states to provide home loans with as low as a 3% down payment. While these are not tax credit programs and you still must come up with a down payment, you still can get a lot of financial help, especially if you have a lower income.

You also may qualify for a home loan and get the down payment as a gift, which in theory can give you a 100% financing loan. Special rules apply for how the gift is received and from whom, so check with your lender.

HUD offers some foreclosed properties at steeply discounted prices; there are even a few older homes available for as little as $1. This is a very small number of homes, but there are also homes listed on the site for less than $50,000. So this can be a good option for lower income buyers.

Federal Housing Administration-backed home loans are generally the best option for people with lower credit scores, lower income and limited down payments. This program can get a first-time buyer a home loan with only a 3.5% down payment. Also, you may receive your down payment as a gift from a relative or close friend. The only major requirement is the person must provide a letter that states the money is a gift and not a loan and does not need to be paid back.

Also, you can get closing cost help from the seller, if he or she agrees to do so. These options make getting an FHA loan very attractive for the first time home buyer.

]]>https://www.refiguide.org/first-time-home-buyer-tax-credit/feed/03281FHA Loan Limits in California – Updated 2018 Loan Amounts for San Diego, Orange County, Los Angeles, Riverside, Fresno, San Jose, San Francisco and Morehttps://www.refiguide.org/fha-loan-limits-california
https://www.refiguide.org/fha-loan-limits-california#respondFri, 09 Feb 2018 22:51:12 +0000https://www.refiguide.org/?p=3235A very popular home loan option in California in 2018 is the FHA loan. The Federal Housing Administration backs this program. It is one of the most affordable home loans today which is why so many first time home buyers consider FHA to insure their mortgage. An FHA loan is guaranteed against default. If you… Read More »

]]>A very popular home loan option in California in 2018 is the FHA loan. The Federal Housing Administration backs this program. It is one of the most affordable home loans today which is why so many first time home buyers consider FHA to insure their mortgage.

An FHA loan is guaranteed against default. If you do not pay your mortgage, the lender will be reimbursed for most of the amount you owe. This is important to you because it means that lenders are much more willing to give FHA home loans to buyers who have credit problems and less than a 20% down payment. FHA loans are a major reason that the home ownership rate is as high as it is in the US today. It is possible with an FHA loan to get a home loan with as low as a 3.5% down payment and a 580-credit score.

However, the FHA does have its limits. For example, there are limits to the amount of home loan that FHA will insure. Every year, FHA performs a recalculation of what the maximum loan is that FHA will insure in case of default. Home prices in 2018 are generally on the rise in most of the US, so FHA is continuing for now to increase the limit.

As of the beginning of 2018, the conforming limit around the US for FHA loans is $424,100. This is the FHA limit for most parts of the country with normal real estate costs.

But what about other parts of the US where real estate and cost of living is much higher? FHA has taken this into consideration. For some of the most expensive parts of the US, including San Diego, Orange County, Los Angeles, Riverside, Fresno, San Jose, San Francisco, the limit for these loans is much higher.

For these areas of California with much higher costs for real estate, the maximum amount of loan that FHA will back is a maximum of $636,100. However, the exact amount for 2018 will hinge upon which specific city or county you are in. But most of the counties that contain the largest California cities, such as Los Angeles, San Diego and San Francisco, will have the maximum FHA loan amount.

Here are some of the maximum conforming loan amounts for many of the most populous parts of California:

Alameda: $636,150

Contra Costa: $636,150

Marin: $636,150

Monterey: $575,000

Orange: $636,150

Riverside: $379,500

Fresno: $281,000

Sacramento: $488,750

Santa Cruz: $636,150

San Benito: $636,150

San Francisco: $636,150

Santa Barbara: $636,150

Santa Clara: $636,150

Sonoma: $595,700

Ventura: $636,150

Why Does FHA Increase Loan Amounts in California?

It is simple really: Houses in most of California cost much more than in other states. A four-bedroom home in Dallas might cost $275,000. The same home in San Francisco will cost two or three times more. If FHA only had one maximum conforming amount for the entire country, many people in more expensive parts of California would not qualify for a loan. The US government wants to encourage people to buy homes because it leads to stable communities and more economic activity.

Another issue with certain real estate markets is that some of them increase in value much faster than others. So, FHA needs to set different maximum conforming amounts based upon the individual economic characteristics of San Francisco, San Diego, Los Angeles, Orange County, etc. Before making an offer, you need to determine how much of a FHA loan do you qualify for.

If FHA did not have such policies, many people in California with lower credit scores and incomes would not be able to get a home. For people with credit scores in the low 600s and only 3.5% or so to put down, FHA loans may be the only option. Getting a conventional loan requires better credit and a bigger down payment. Find out what it takes to get pre-approved for a FHA mortgage today.

Can You Beat FHA Loan Limits for California?

Yes. If you want to buy a home that has a higher value than what FHA will allow, here is what you need to do:

Put down more cash. CA FHA loan limits are based upon the loan amount and not what the home is worth. If you can do it, you can save up more money for a year or two before you buy so that you can have a larger down payment. Putting more cash down also drops the insurance premiums that you pay on your loan.

Increase your credit score. If you need to get a conventional loan, you will probably need a credit score from about 640 to 680 to qualify. You can increase your credit score over time by making all payments on time and paying off as much debt as you can.

Consider areas that are less expensive. Take a look at counties that surround the more expensive parts of California. You can find areas that have a lower cost of living and cheaper real estate. And more companies allow workers to telecommute these days, so this may be more possible than you think.

Takeaways on Higher FHA Loan Amounts in California

FHA loans are a great option for people with lower income and credit scores. But in California, you can run up against the maximum conforming loan limit quickly. Look at what the maximum amount is for the part of California you are considering before you start to go house shopping.

]]>https://www.refiguide.org/fha-loan-limits-california/feed/03235How Do VA and FHA Constructions Loans Work?https://www.refiguide.org/how-do-va-fha-constructions-loans-work
https://www.refiguide.org/how-do-va-fha-constructions-loans-work#respondFri, 09 Feb 2018 21:13:45 +0000https://www.refiguide.org/?p=3228People who want to get a FHA or VA construction loan are usually in an exciting time of life. Building your own home or rehabbing your home is a great way to enjoy the American dream of home ownership. The purpose of this article is to review how VA and FHA construction loans work. With… Read More »

]]>People who want to get a FHA or VA construction loan are usually in an exciting time of life. Building your own home or rehabbing your home is a great way to enjoy the American dream of home ownership. The purpose of this article is to review how VA and FHA construction loans work. With this basic understanding, you will be better prepared for your home construction or rehabilitation project.

Types of FHA Construction Loans

Construction and permanent mortgage loan: This is a loan that you can use for both construction and for the permanent mortgage once the home is complete.

203k rehab mortgage: This type of rehab loan can be suitable if you are refinancing or buying a home that is in need of repair or rebuilding.

The big advantage of these FHA construction loan programs is that they put the purchase and construction costs into a single loan. So, rather than borrowing with a short-term loan and then repaying the loan and getting a permanent mortgage, you are just doing the entire loan process one time. This means a lot less paperwork, stress, as well as lower fees and closing costs.

An FHA-backed construction-permanent loan is both a construction short term loan and a long term residential mortgage. This type of loan is usually needed for the home buyer who buys a plot of land himself and uses a contractor to build the home. Closing on the loan happens before the construction of the house starts, such as when the land purchase is finalized. Funds for the construction project are put into an escrow account. They are then released in stages are milestones in the construction process are met. This will typically involve several inspections done by an independent party to check on progress. FHA usually has a final inspection required to verify that construction has been done properly.

Major advantages of the FHA construction loan are:

Down payments as low as 3.5% in many cases depending upon your credit and income

Pay interest only while the home is being constructed

Easier qualification for people who have at least a 620 credit score

Some lenders may allow a higher debt to income ratio

An FHA construction loan requires you to have the land for six months or less when you apply for the loan. After the loan closes, the lender disburses fund from the construction loan over time. The 203K loan rates remain competitive as well.

An FHA 203k loan comes in two different types, depending upon your project needs:

A streamlined FHA loan that offers as much as $35,000 in upgrades and repairs. It is common for example for a home buyer to obtain this money to do things to make the home more livable, such as remodel the kitchen, paint the entire interior and buy new carpeting.

A standard FHA loan for bigger projects and can be done either with an original purchase or refinance. Even if the home has to be torn down and completely rebuilt, it is possible to get this type of FHA 203k loan.

To qualify for a 203k loan, you need to be an owner/occupant of the property. This type of loan can be used on properties from one to four units. It is required to borrower at least $5000, and you can borrow enough to finance 110% of the home’s expected value after you improve it. The interest rate on this type of loan will be a bit higher than on a standard loan. This is partly because lenders have to spend more time and money keeping track of the project and handling how money is paid out.

The 203k loan must use licensed contractors to complete the work, and they will need to know early on that you are using a 203k FHA loan. The FHA process requires certain paperwork and rules so you will need to work with a contractor who is familiar with the FHA way of things.

FHA borrowed funds is often one of the most affordable ways to have rehab work done on your property. But remember that you will have to pay for mortgage insurance and you have to pay fees for each of your monthly payments. Before you get too excited, check with a loan officer to make sure that you meet the FHA-loan requirements for this type of construction loan.

VA Construction Loans

Building a home with a VA construction loan is possible but can be challenging. Borrowers can use their VA entitlement to get a mortgage to build a new property, but it can be difficult to find a lender that will issue a VA construction loan. This is more difficult now in the wake of the housing and mortgage crisis of a decade ago.

However, what is happening more often now is veterans who want to build their own home get a construction loan through a local builder. Then as the home building process is completed, the borrower can refinance the construction loan into a long term VA mortgage.

Some builders may have special programs for veterans who want to build their own home. Make sure you do your homework on the company and determine that it is a good builder with a long term track record of success. But once the home building process is done, you should not have major difficulty converting that loan to a permanent VA loan. Just be sure that the home has had a VA appraisal and all work was done by a builder with a valid VA builder ID. Of course before making big plans, it makes sense to speak with a loan officer to verify you meet the VA-loan requirements for this type of home rehab program.

]]>https://www.refiguide.org/how-do-va-fha-constructions-loans-work/feed/03228What Fico Score Is Need for to Refinance Your Home Mortgage or Credit Line?https://www.refiguide.org/fico-score-refinance-home-mortgage-credit
https://www.refiguide.org/fico-score-refinance-home-mortgage-credit#respondWed, 31 Jan 2018 00:13:40 +0000https://www.refiguide.org/?p=3184It is common to wonder what type of FICO score you need to refinance your mortgage today. Fortunately, lending standards have eased in the past five years, so you may be able to qualify with a lower credit score to refinance than before. In 2018 it is crucial to understand that most refinance programs have… Read More »

]]>It is common to wonder what type of FICO score you need to refinance your mortgage today. Fortunately, lending standards have eased in the past five years, so you may be able to qualify with a lower credit score to refinance than before. In 2018 it is crucial to understand that most refinance programs have minimum fico score requirements. There are still a few that have limited or no fico score requirements for mortgage refinancing this year and we will elaborate on the specifics later in this article.

Generally, most lenders will require you to have a FICO score of at least 620, but it will depend upon the type of loan program you choose. Loans that are backed by the Federal Housing Administration or FHA may have lower minimums, but the specific lender could have higher requirements than FHA’s. The good news is if you qualify for a streamline refinance through FHA or VA, you do not have to worry about credit scores as much.

There are more mortgage refinance options in 2018 for people with all ranges of fico scores.

Below is more information about the type of FICO score you may need to refinance under various loan programs.

FHA Refinance Programs

FHA mortgage refinancing is usually the easiest of all refinances. If you are pulling out cash, you will need to have your credit and income checked, with a credit score in the low 600s usually required to complete the deal.

However, one of the major benefits of an FHA loan is you can do the streamline refinance, if you only want to get into a lower rate without pulling out cash. A streamline refinance generally does not require any particular credit score, and the lender will usually not check your income either. It is possible the lender could check them, but a low credit score generally will not prevent you from refinancing an FHA loan.

If you want to replace your non-FHA loan with a new FHA loan, expect to need a credit score of 580 or higher. Some FHA-approved lenders may have higher FICO requirements. If you are in the high 500’s or low 600’s, be prepared to do some loan shopping with various lenders to get approved. Check to learn about the minimum credit score for a FHA loan is with your credentials.

VA Refinancing Programs

If you already hold a VA mortgage, you have the opportunity to do a VA streamline refinance through the VA. It works very much like an FHA streamline refinance, but with even lower interest rates. This refinance does not generally require a credit check or minimum FICO score. But as with FHA loans, the specific lender can require higher FICO standards.

If you want to refinance into a VA loan and do a cash out loan, most recognizable lending companies will need to have a 620 minimum FICO score. Check VA loan credit requirements today.

Conventional Mortgage Refinance Options

Conventional loan refinances will vary on their required FICO scores. But you will usually find requirements in the range of 620 to 680, depending upon the lender. Keep in mind that the best rates to refinance on conventional loans are usually for people with 740 or higher scores. Also remember that all conventional loans must be fully documented; there is no option for a streamlined refinance on conventional loans. This means you need to have bank records, pay stubs and tax returns to qualify.

Skin in the Game Is Needed

It is easier to qualify for a refinance now than five years ago in terms of FICO score, income and debt to income standards. But you will need to have at least 20% equity in many cases before you can qualify for most refinances. But if you want to do a refinance with less equity, you can with private mortgage insurance. Note that how much you pay for mortgage insurance depends upon your credit score.

Tips to Improve Your Credit and Raise Fico Scores

It will always help to raise your FICO score, even if you are doing an FHA or VA streamline refinance. If you are going to do a refinance in the next year, below are some simple tips to make the path smoother:

Pay all of your bills on time. It is especially important to make certain that no bill is paid 30 days late. If you have 30 day late payments on your credit report, this will lower your score in a big way. It is especially important to not have late payments on your mortgage or car loans.

Pay down as much debt on credit cards as you can. It is best to have your credit usage no more than 30% of your limits. This will raise your score quickly once you pay off excessive debt.

Do not have any more credit inquiries than necessary on your credit report, and none is best. The more you inquire about new credit, the more it will lower your score.

Takeaways on Mortgage Fico Score Rules for Refinancing in 2018

Refinancing your mortgage into a lower rate, and possibly pulling out cash, is easier than it used to be. If you are just refinancing without pulling out cash, the credit score requirements are pretty flexible, especially if you are working on a VA or FHA refinance.

If you are pulling out cash, you will need to have a score at least in the low to mid 600s to get the deal done.

Whatever your score, you can still get the best deal by checking with several lenders. For starters, go to a mortgage broker, a bank and a credit union to compare rates.

]]>https://www.refiguide.org/fico-score-refinance-home-mortgage-credit/feed/03184What Are the VA Loan Requirements for Credit and Down-Payments in 2018?https://www.refiguide.org/va-loan-requirements
https://www.refiguide.org/va-loan-requirements#respondTue, 30 Jan 2018 22:16:18 +0000https://www.refiguide.org/?p=3167There are many reasons why VA loan requirements are so attractive to borrowers with military credentials this year. The U.S economy is booming again, the housing market is soaring and eligible VA home loan applicants have access to arguably the best mortgage to refinance or buy a house in 2018. When most people look at… Read More »

]]>There are many reasons why VA loan requirements are so attractive to borrowers with military credentials this year. The U.S economy is booming again, the housing market is soaring and eligible VA home loan applicants have access to arguably the best mortgage to refinance or buy a house in 2018. When most people look at buying a home, one of the most important considerations is to compare the types of loans and down payments that are required. Once you start to look at what is available, it is easy to understand why many military members and veterans choose a VA home loan. The 2018 VA loan requirements continue to boast of some of the most attractive credit rules and down payment options for those who qualify for VA financing.

People with past credit problems love that VA loans have No minimum credit score requirements in 2018.

Credit Requirements on VA Loans

Another advantage of VA loan requirements is the flexible underwriting. There is no minimum credit score for VA loans. Many approved VA lenders will have their own credit standards; many require a credit score of at least 620. There are some lenders that will offer VA mortgages at a lower interest rate, but they will want a higher interest rate. If you are looking for a VA loan with 570 credit score, you will need to be talking with the right lending sources. There are a few mortgage companies that will approve VA loans for people with 500 to 600 credit scores, but most companies are looking to offer VA loans to people with credit score at 620 or higher.

The VA program also allows the borrower to use their benefit only one or two years after a bankruptcy or foreclosure. The VA is required to look at the entire credit picture and will not necessarily decline you because of a negative credit event in the recent past.

VA Loans Require $0 Down Payment

Maybe, the most attractive feature of VA loans today is that most who qualify can put no money down and get a mortgage. Plus, there is no mortgage insurance required. By offering a guaranteed zero-money down home loan, the VA is able to provide more flexibility in buying a home than you would otherwise be able to. In the past, many people had to continue to pay rent for years while they saved up 10% or 20% to buy a home. The VA loan program is one of the few mortgage options today that allows 100% financing.

About 90% of VA loan borrowers use 100% financing. But there is an advantage to putting down 5%. If you put down at least that much, your VA funding fee will drop. That fee is usually 2.15% of the loan amount for 100% VA financing. But if you make a 5% down payment, the fee will drop to 1.5%. The fee lowers more if you put down 10%.

VA Down-Payment Requirements More Attractive than Conventional and FHA Programs

We’ve establish that VA loan requirements allow veterans and active military personnel to buy a home with no money down. There are more low-down payment mortgage options today than a few years ago. Today, conventional mortgages are available with a 3% down payment, and others require a 5% down payment. But people who have lower credit scores than 640 may have trouble qualifying for these programs. Having a lower credit score also can result in a higher interest rate.

For borrowers that do not have VA loan eligibility, FHA is a good option for people with lower credit score, and they are available with a 3.5% down payment if you have a 580 or higher credit score. The interest rates on these loans are competitive as well. But you will pay higher than average mortgage insurance premiums. Those premiums also cannot be cancelled in many cases, as can conventional loan mortgage insurance. No money down and no mortgage insurance make 2018 VA loan requirements very attractive.

Income Requirements with VA Loans

Borrowers need to show they have enough income to pay the loan each month. They should not have too much debt, but the VA loan guidelines offer more flexibility than for conventional loans. Underwriters are required to do their due diligence under federal law, but there is more flexibility because this is a government benefit program.

Some Advantages of VA Mortgage Loans

As noted above, VA loans are one of the only loan programs today available with 100% financing. Back before the mortgage crisis, there were many 100% financing loan options, but VA and USDA loans are about the only ones left in 2018.

There are other advantages of VA loans you should be aware of as well. VA loans, like FHA loans, allow the borrower to use gift funds for down payments and closing costs. The gift funds need to come from people who are close to you, such as family or close friends. Lenders will want to see the paper trial for the gift money.

So, you will have to show bank statements or financial statements to show where the money came from. The money will have to be seasoned as well; a relative cannot just send wire you the money just before closing. It will probably have to sit in your bank account for at least 60 days to be able to work for a down payment or closing cost assistance. Most lenders also want to see a letter from the person giving you the financial gift. It will need to include the information of the donor, his or her relationship to you, and legal wording that states no repayment of the gift is needed in the future.

7 Tips to Avoid VA Mortgage Scams

Are you in the military or a veteran? Thinking about using your VA benefit to buy a home? We want to warn you about various VA mortgage scams out there that can rip you off for thousands of dollars. Generally, you should be wary of too good to be true mortgages and refinancing offers that could come in the mail from what looks like the Department of Veteran Affairs. Some of these offers are scams.

For example, in 2013, a retired Air Force colonel had a refinancing deal on a VA loan fall through. The woman claimed that she and her husband responded to a mailer that promised to do a streamline refinance on their current VA mortgage. The offer promised to give them a new loan with a lower rate and with minimal underwriting. Under normal conditions, this type of loan is possible and can be a good financial move, if you are able to refinance at a rate that is at least .5% below what you have now.

Talk to experienced, VA lending representatives about VA mortgage requirements before signing documents that commit you to buy a home.

The couple said the company representative told them that their 30 year fixed rate would begin at 4.75%, which was .75% above the rates at the time. But it would go down every 90 days until it got to 3%, no more than 180 days after closing. The couple paid several thousand dollars but the rates never dropped.

Sadly, this type of scam with VA loans is becoming more common. All veterans and active military should beware of anything they get in the mail that offers mortgage refinancing. Any letter in the mail that is regarding your VA mortgage probably is not from the VA; thousands of mortgage solicitation companies have access to mortgage records which are public record. It is very common for people holding a mortgage to be solicited in this fashion. Some of these are legitimate offers, but some of them may be scams.

Dishonest companies may misrepresent what they are offering, and may pretend that they work with the VA directly. In reality, they are just another mortgage refinance company that may use illegal tactics to get you to agree to a refinance. Here are some tips so you know what to look out for:

Be careful to know who is sending you the VA mortgage offer. The VA will never contact you in the mail about your mortgage. Keep this in mind when you read anything in the mail. Letters are designed to look like they are official to make it appear they are from your lender. The company is required to have a disclosure in the letter, but it usually is in tiny type at the bottom and on the back of the letter.

Never pay money up front to any company. If a mortgage company is asking you to pay money up front for services to be performed later, you should walk away.

Never pay any fees or points that are out of the norm. A good lender only should charge you up to $1000 to underwrite and process the loan. VA appraisals are usually $300 to $500. Anything outside these numbers may not be on the up and up.

Choose mortgage terms that fit your needs. It is good to be conservative when dealing with a home loan. A 30 year fixed rate is often the best option. You know exactly what your payment will be each month for many years. If you want to pay more on the loan, you can, but you know what the minimum payment will be for the long haul. It is risky to depend upon an adjustable rate so that you can just have a lower payment for a few years. An ARM is also another way for the mortgage company to come back in three or five years and get you to pay for another refinance.

Try and work with VA mortgage companies inside your region. The VA loan company you work with should be licensed in your state, and should be in your city. You want to be able to get customer service easily if something goes wrong. You should have the name and phone number of a licensed loan originator in your town.

Before you respond to any VA loan offer, you should check with other banks and ensure that you have shopped around so you can compare the rate being offered with others.

Military members and retired vets have earned the right to enjoy their VA home loan benefit. But there are unscrupulous companies out there, so make sure you are not scammed.

Current VA Loan Limits

Technically, there is no limit on how much you can borrow with VA eligibility; you only need to show that you have the income to make the payments. But there is a limit to how much liability the VA assumes; for many parts of the country, the mortgage lenders use the conforming loan limit of $417,000.

]]>https://www.refiguide.org/va-loan-requirements/feed/03167Why the 15 Year Mortgage Is So Appealing in 2018https://www.refiguide.org/15-year-mortgage-rates-today
https://www.refiguide.org/15-year-mortgage-rates-today#respondTue, 30 Jan 2018 17:02:48 +0000https://www.refiguide.org/?p=3155In many circles today the 15-year mortgage is touted a good financial choice for homeowners who can afford to pay the much higher payments each month, and who want to get rid of their mortgage much faster. Potentially, 15-year mortgage rates today open up the door of opportunity for a borrower to save thousands in… Read More »

]]>In many circles today the 15-year mortgage is touted a good financial choice for homeowners who can afford to pay the much higher payments each month, and who want to get rid of their mortgage much faster. Potentially, 15-year mortgage rates today open up the door of opportunity for a borrower to save thousands in interest; in fact, if you qualified you could save six figures worth of interest on some loans with a 15-year product.

In 2018, banks and lenders are clearly marketing the 15-year loan as the best priced option. It is no secret that the 15-year mortgage rates are lower and of course the math doesn’t lie. If you save half a percent over 180 months, then you will save a significant amount of money in your pocket depending on the amount you originally borrowed. Let’s examine these present opportunities.

Find out if the 15-year mortgage will save you enough money to justify the higher monthly payment.

Online mortgage companies have pointed out the dramatic savings. For example, on the 15-year interest rate with an APR of 3.36% on a $300,000 loan the borrower would pay 2.124 a month (principal and interest) and $382,335 over the length of the fifteen-year term. When you compare the 30-year option at 3.89% APR the monthly payment would be less at $1,413 (principal and interest) but over the course of thirty -years, the borrower would be paying a total of $508,783. So with this example, the borrower could potentially save an amazing $126,448 by choosing the 15-year mortgage loan. It is always wise to compare 15 and 30 year mortgage rates before making a significant financial decision like buying a house or refinancing a mortgage.

But to make the 15-year mortgage a prudent choice, you need to have a solid monthly income and enough money left over after your payment to cover your savings, expenses and various emergencies.

The 15-year mortgage is not used that often; as of 2016, only one in six borrowers used a 15-year mortgage. Many borrowers shy away from a 15-year mortgage because the monthly payment can be up to 50% more than a 30-year mortgage payment. Whether it is a right choice for you will depend upon your circumstances.

Overview of the 15-Year Fixed Rate Mortgage

The major advantage of the 15-year home loan is you will be mortgage free after only fifteen-years. Most 15-year mortgages have a fixed rate, which will keep your rate and payment the same as long as you have the mortgage. But note that your taxes and insurance may change over time. Below are some of the other advantages of the 15-year mortgage:

You will own your home yourself faster. Owning your home free and clear is a major goal for many of us. What matters the most to them is knowing their home is paid off.

Build your equity more quickly with a 15-year home loan. You have a lower interest rate and a higher payment amount, so you will build your equity faster as you are paying down principal quicker.

Save big. Lenders have fewer risks on a 15-year mortgage, so they have a lower interest rate. This could mean you may save .5% to .75% on a 15-year mortgage over a 30-year mortgage. Your loan is also cheaper because you pay interest for only half as long. To understand how much your savings are, compare the 30-year and 15-year mortgage rates in a side-by-side analysis: Research 15-year refinance rates.

Some of the Downsides of a 15-Year Mortgage Are:

You will pay more each month. The monthly payment for your 15-year mortgage will be 50% or so more per month. You also need to pay like always your property taxes, insurance and mortgage insurance if you put down less than 20%. This can make it more difficult to pay for emergencies, such as a major car repair or a new roof. Even if you are sure the numbers are workable now, this could change in a few years, but you are stuck with the higher payment. You cannot get out of it unless you refinance.

More home equity is in the home. It is good to build your equity faster, but all that money is locked into the home until you sell or borrow it. Some people prefer to pay the 30-year loan and invest the difference in high interest investments.

You could be losing opportunity. Using more money to make your mortgage payments mean you do not have as much money available for other investments. You could earn a good rate of return in real estate investments and in the stock market.

You cannot qualify for as much with a 15-year mortgage. If you get a home loan on a 15-year term, you need to show you have the income to pay the higher mortgage. This means you will not qualify for as much of a home as with a 15-year mortgage.

You do not have as many tax advantages. You will lose the valuable mortgage interest deduction when you pay off the loan faster. Also, you will pay a lower amount of interest, so you cannot write off as much money on your taxes.

Should You Get a 15-Year Mortgage?

A fixed rate, 15-year mortgage is a useful tool for borrowers who have enough income to afford the bigger payment, and are still able to save money and invest for retirement. If you can still do those other things, you may want to get a 15-year mortgage loan. A lot of people place a lot of emphasis on owning their own home free and clear. Many people also are more comfortable going into retirement knowing they have their mortgage paid off. But if you are unable to save money for emergencies and invest for your retirement, you may want to think twice and stick with a 30-year mortgage.

Compare the 30 and 15-Year Rates Today: As a compromise, you can also get a 30-year loan and over pay on it as you are able to. You will have a higher interest rate, so you are paying more interest than a 15-year home mortgage. But by paying down your mortgage faster, you can enjoy many of the same benefits of the shorter-term loan, but you can make the lower 30-year payment when you need to.

Disclosures: ¹FICO: 740. Single Family Residence. $400,000 Value ($800,000 for Jumbo Loans). $300,000 Loan Amount ($640,000 for Jumbo Loans). Owner Occupied. Refinance. Zip Code: 07054 (1-30-18) The example does not include any origination or discount points. Please be advised that property taxes and hazard insurance premiums were not included in the payment example. Please be aware that no private mortgage insurance, (also known as PMI) was required in this example. 15-year home loans are amortized over a 180-month period.

]]>https://www.refiguide.org/15-year-mortgage-rates-today/feed/03155What Loan Documents Are Required to Get a Pre-Approval for FHA Mortgage in 2018https://www.refiguide.org/fha-loan-requirements-preapproval-mortgage
https://www.refiguide.org/fha-loan-requirements-preapproval-mortgage#respondFri, 26 Jan 2018 17:21:51 +0000https://www.refiguide.org/?p=3140Do you want to learn what the loan requirements are to buy a home with a FHA mortgage in this year? The 2018 FHA loan requirements remain attractive to renters because the credit standards are not prejudice and the down-payment rules are very reasonable. Getting a pre-approval for a FHA loan is the first step… Read More »

]]>Do you want to learn what the loan requirements are to buy a home with a FHA mortgage in this year? The 2018 FHA loan requirements remain attractive to renters because the credit standards are not prejudice and the down-payment rules are very reasonable. Getting a pre-approval for a FHA loan is the first step for millions of people buying a house for the first time. Borrowers love this government finance program because the FHA requirements it is is one of the easiest mortgages to qualify for and they have a history of very low interest rates. Realtors love the FHA loan program because the credit requirements are relaxed and you do not need a large deposit to be approved by a trusted mortgage company.

Flexible credit score minimums and low FHA down-payment requirements are just a few of the reasons that Federal Housing Administration has been backing the most popular loan programs in the country for the last eight decades.

However, the days of limited documentation with FHA and other government mortgage products appear to be numbered. Documentation is an area where major changes have been made in the mortgage business in the past five years. The federal government requires lenders to require you the borrower to submit more documentation than a decade ago. That doesn’t mean that 2018 FHA requirements are not easily obtainable. If you can afford a house, the the Federal Housing Administration has made it a priority to give the lending community a solid foundation for approving your FHA mortgage application.

There are two simple reasons for this: First, the mortgage meltdown was largely due to low doc and no doc mortgage loans. When people do not have to prove their income with documentation, there is a much higher chance of default. Second, the US government now has the Ability to Repay rule that took effect in 2014. This law requires the approved FHA mortgage lender to do its due diligence to ensure you have the income to afford the loan.

What this means for you is you will need to supply plenty of paperwork to get pre-qualified for your FHA mortgage. Below is a checklist of the documentation required as of 2018 to get a pre-approval for FHA loans , as well as for the loan to close.

A pre-approved FHA mortgage is an important part of the home buying process. if you want to be insured by the Federal Housing Administration. When you shop for a house, you want to show sellers that you have been approved for a loan. Many real estate agents will not even show you the house unless you have been pre-qualified for a mortgage. It also makes sense to determine how much you can afford with a FHA loan before you start shopping and get your heart set on a house if you can’t afford it.

What FHA Loan Documents Are Required?

Note that individual lenders will have different specific paperwork requirements, but with FHA loan approvals, there will always be the same documents required by the US government. HUD rules states that FHA must ensure that the loan package has all documentation that supports the decision of the lender to give its approval. Here are the documents you will need to submit to meet the FHA loan requirements this year.

Loan Application for a FHA Mortgage

All FHA borrowers who will have responsibility for the mortgage debt have to complete and sign the Uniform Residential Loan Application. Applying for a FHA loan is pretty simple, but the application and disclosures must be completed correctly. You can’t omit information from the previous years. The FHA approved underwriter will want to consider your income, credit, debt obligations, payment history and job stability for at least the last 2-years.

SSN Verification

Today, all lenders in the US must obtain proof from you that you have a social security number. The HUD handbook states that all borrowers in the US must have a social security number and must provide proof of it to the lender. Usually, all you need is a photocopy of your SS card. Since the Department of Housing and Urban Development added this step to the FHA requirements, fraud has decreased.

Credit Report

As you would expect, your FHA lender will need to see a copy of the credit report for each borrower on the loan. The lender must show that it is making its credit decision based upon a review of your credit report. The credit reports shows how well you have paid back your debts in the past and how much current debt you currently have.

Many borrowers choose FHA home loans because of the credit score flexibility with the program. You can technically qualify for an FHA mortgage with a 500-credit score. That low of a score will make it hard, but it is possible. To qualify for a 3.5% down payment, you need to have a 580-credit score. Generally, a score of 620 or above will give you the most choice of lenders. Even though the minimum score is only 500, most lender will be looking for stronger credit credentials, especially if you are seeking a 3.5% down-payment.

Your loan has mortgage insurance on it that you pay for up front and as part of the monthly payment. So the broker or lender is able to give people with lower credit scores a loan.

All HUD-approved companies are aware of the FHA credit requirements, but some lenders choose to add overlays in underwriting, to minimize the risk of delinquencies and defaults. So just because FHA mortgage requirements permit credit scores as low as 500, doesn’t mean that all government lending companies are willing to take on the risks. When reviewing different companies always ask them what their minimum credit score for FHA loans is, as it can vary significantly between various lenders.

Employment Verification to Meet FHA Requirements

HUD also requires that FHA get proof of your employment. There was a time when you did not have to prove where you worked; the lender would take your word for it. But now you must show proof of where you are getting your income. Basically, you can just give your employment information on the FHA mortgage application, which includes the name, address and phone number of the employer.

If you are self employed, you can note on the FHA application that you work for yourself and list the address of where your office is.

Income Documentation for FHA

FHA lenders are required to verify W2’s for the past two years if you are a salaried employee. If you own your own business or considered an independent contractor, you will need complete tax returns and 1099’s for the previous two years. This information is used to verify your income for the loan underwriting and to ensure that you can afford the loan payments. Tax returns are particularly important for the self employed as you do not have pay-stubs to provide to the FHA mortgage lender.

Also, if you are self employed, you will need to give the lender a profit and loss statement for the current year or quarter and three-months of bank statements. The FHA requirements for self-employed and independent contractors requires more income documentation and the process could take longer if you aren’t organized and provide your loan officer with the requested paperwork in a timely manner.

FHA Amendatory Clause

This is a document that is unique to FHA mortgages. After you are approved for the loan and the deal is going to closing, you have the chance to get out of the deal without giving up your deposit. Some of the reasons that people back out of the loan is if the home appraises under the sales price. With today’s housing market, this is less of a problem as most homes are appraised for the sales price or higher and meet the FHA loan requirements. However, when the market falls in the future it could become more of a problem for FHA applicants.

Interest Rates on FHA Loans

The Federal Housing Administration has made affordability a priority with FHA loans, so it should come as no surprise that the FHA rates today remain competitively priced when comparing to other conventional mortgages backed by Fannie Mae and Freddie Mac. Don’t forget to compare your total monthly mortgage payments when considering other types of loans, as FHA mortgage insurance premiums are sometimes higher than private mortgage insurance. The bottom line is that you can’t simply compare interest rates when comparing home loans. Consider your total payments that include, principal and interest, mortgage insurance, taxes and property insurance and you are more likely to make a prudent decision.

Takeaways on Meeting the FHA Mortgage Requirements

Getting qualified for a FHA mortgage is a more onerous process today than a decade ago. You do need to have plenty of paperwork to show that you can afford the home and the 2018 FHA requirements have been adjusted with this goal in mind. And there are other documents needed to finalize the loan that did not exist in 2008 before the crash. But being approved for a FHA mortgage doesn’t have to be difficult if you are organized and have all of the above documents, you should be able to get pre-approved for a FHA loan and move into your home in 2018 with the confidence that affordable housing provides.

]]>https://www.refiguide.org/fha-loan-requirements-preapproval-mortgage/feed/03140What Are the Down-Payment Requirements for Fannie Mae in 2018?https://www.refiguide.org/fannie-mae-down-payment-requirements-2018
https://www.refiguide.org/fannie-mae-down-payment-requirements-2018#respondFri, 26 Jan 2018 02:41:24 +0000https://www.refiguide.org/?p=3133Home buyers purchasing a home with a conventional loan want to know that the down payment requirements are for a Fannie Mae loan in 2018. Below is more information about what the minimum down-payment rules will be for most borrowers qualifying for a Fannie Mae home loan this year. A conventional home loan is not… Read More »

]]>Home buyers purchasing a home with a conventional loan want to know that the down payment requirements are for a Fannie Mae loan in 2018. Below is more information about what the minimum down-payment rules will be for most borrowers qualifying for a Fannie Mae home loan this year.

A conventional home loan is not insured or guaranteed by the US government. Conventional loans are different than VA and FHA loans, which are backed by the government. A conventional home loan is made by a private mortgage company. When they do require mortgage insurance – when your down payment is less than 20% – that insurance is issued from a private company and not from the government.

The clear majority of conventional loans stick to the guidelines issued by Fannie Mae or Freddie Mac. These are two government sponsored companies that buy loans from private lenders. Most mortgage lenders like to sell their loans to Fannie or Freddie. It lowers their long-term risk and increases their ability to make new loans. But Fannie and Freddie do have certain standards for the loans they will buy. Down payment is one of the critical criteria.

Fannie and Freddie will purchase loans with LTVs as high as 97%, which means a 3% down payment. This is where the bar is set for 2018. So, many conventional mortgage lenders will offer loans with 3% down payments, but not all of them. You may have to shop around to find a mortgage company that offers a 3% down payment for someone with your credit score and debt to income ratio.

Fannie Mae loan guidelines states that it currently purchases loans from private lenders with 3% down payments because it wants to increase access to credit for people who have acceptable credit scores. Allowing people to make 3% down payments to buy a home expands the opportunity of home-ownership to millions of people.

There are some exceptions to the 3% down payment rule for Fannie Mae loans. Some lenders want to keep the mortgages they issue in house rather than selling them. This may allow these lenders to have more flexibility on down payments. Some might want higher down payments and some less. But most conventional lenders sell their loans to Fannie Mae or Freddie Mac, so a 3% down payment is typical.

But this does not always mean you will qualify for the 3% down payment. Depending upon the loan, the conventional lender may require you to put down more money. For instance, if you want a jumbo loan, these exceed the conforming limits of Fannie Mae and Freddie Mac. This means a higher down payment is needed.

Lower Down-Payment Requirements than FHA Loans?

FHA loans are popular because they are easy to qualify for; people with credit scores as low as 500 may qualify, and people with a 580-credit score can qualify for a 3.5% down payment. But many people do not know that Fannie and Freddie conforming loans often offer an even lower down payment of 3%.

Conventional loans are harder to qualify for, with a 640-credit score typically required. Conventional loans are typically the best option for people with a credit score at least that high. But if you have a lower score, and/or have past credit problems including a bankruptcy or foreclosure, you may want to go with an FHA loan. See 2018 FHA loan requirements to determine if this type of mortgage is a better fit for your credentials.

Fannie Mae Allows Gift Money for Down Payments

If you want a Fannie Mae conforming loan in 2018 and do not have enough money for a 3% down payment, you may still have some good options. Many mortgage programs today will allow you to get down payment funds as a gift. This is true for conventional and FHA loans. By leveraging the Fannie Mae gift-fund rules, many home buyers are able to qualify for a $0-down mortgage. (Gift proceeds can cover the down-payment requirements if borrower is eligible.)

You typically can get the gift funds from a family member, employer or close friend. If you are going to use a gift for a down payment, you should talk to your loan officer about the requirements. Generally, the gift must be carefully documented with a letter from the party who is giving the funds. There must be a clear paper trail that shows how the money was given to you. Bank statements typically are required. Also, the money cannot be a loan; it must be a gift. If you have VA eligibility and you are looking for 100% financing without using gift funds, consider the VA program. (see 2018 VA loan requirements)

What You Need to Remember About 2018 Fannie Mae Down-Payment Requirements

In 2018, it is easier than it has been for 10 years to get a Fannie Mae conventional loan. Credit standards and DTI standards are more flexible than any time since the financial crash of 2008 and 2009. With a 3% down payment for a Fannie Mae loan, it is easier to get into a home and to stop paying rent. With these low-down payments, there really is no reason that many people should continue to throw money away on rent. Buy a home now with a Fannie Mae loan and 3% down payment; it is likely mortgage interest rates will rise soon!

]]>https://www.refiguide.org/fannie-mae-down-payment-requirements-2018/feed/03133Ultimate Guide to a Refinance Mortgage with No Closing Costs or Feeshttps://www.refiguide.org/ultimate-guide-refinance-mortgage-no-closing-costs-fees/
https://www.refiguide.org/ultimate-guide-refinance-mortgage-no-closing-costs-fees/#respondWed, 24 Jan 2018 21:42:24 +0000https://www.refiguide.org/?p=3113No mortgage is free. There are always fees and closing costs associated with a refinance mortgage loan, the question is, who is paying for the refinance closing costs and fees? In most cases, all the costs total thousands of dollars. Unless you are okay with paying those costs by opening your checkbook at the closing… Read More »

]]>No mortgage is free. There are always fees and closing costs associated with a refinance mortgage loan, the question is, who is paying for the refinance closing costs and fees? In most cases, all the costs total thousands of dollars. Unless you are okay with paying those costs by opening your checkbook at the closing table, there are other options to pay them when you refinance your mortgage: Just add them onto the amount of the loan. This is known as a no closing cost refinance mortgage, or a no cost refinance.

Consider the possibility of saving some money with a no closing cost refinance mortgage with a competitive interest rate.

This sounds great, right, but what’s the catch? In most cases, you must take a slightly higher interest rate for the life of the loan for the opportunity for no closing costs or fees with the new loan. For example, based on the 1-15 Freddie Mac Weekly Rate Survey, you could have a mortgage at 3.75% and pay for your closing costs and fees at closing. Or, you can do a no closing cost refinance and pay a rate of 4.125%.

When Does a No Closing Cost Refinance Mortgage Pay Off?

Closing costs include fees such as loan origination fees, appraisal, title search and title insurance. These costs vary considerably by each state. But generally, closing costs for loans are on the rise as the housing market is heating up. Bankrate’s 2017 closing costs survey found that the origination and third-party fees on $200,000 mortgage averaged $2,084. For more expensive homes, the closing costs will of course be higher.

No closing cost refinance mortgages are nice for the homeowner who either does not have or does not want to pay the cash up front to redo the loan. Perhaps the interest rate on the new loan is a lot lower than what you pay now, and you really want to pull the trigger on the refinance, but don’t have the cash to pay the closing costs. Including the closing costs in the new mortgage might be the way to lower your payment.

Also, if you do not plan to stay in the house for more than a few years, a no closing cost loan can make a lot of sense. With a regular mortgage, it can take more than five years to recoup your closing costs. Your slightly higher interest rate with a no closing cost refinance is probably going to be less expensive over five years than what you would have paid in closing costs up front.

Experts say it is important to look at the break even point. For example, if you had a mortgage loan at 6% and just want to stay in the home for four more years, you could be a good candidate for a no closing cost refinance mortgage. Paying the higher rate also can make sense if you want the cash to do home renovations.

Another possible benefit of no closing cost mortgages: It makes it easier to shop for a mortgage. You know that the closing costs are the same for each loan: zero. So, you really only need to focus on the interest rate. A HUD study in 2008 found that homeowners were better able to negotiate the rate when they shopped in this fashion. No closing costs to haggle over clears away any confusion and allows you to just focus on the interest rate.

When Does a No Closing Cost Refinance Not Pay Off?

Are you going to stay in your home for more than five years/ If so, your no closing cost loan will cost you more than the refinance with closing costs? In most cases, you will break even on closing costs in three to five years. Getting a no closing cost loan for the long term will saddle you with a higher rate over many years. This could cost you much more than the upfront closing costs and fees you would have paid with a regular mortgage.

For example, let’s say you have two options for a refinance of $150,000. One loan has a 3.75% rate and $3500 in closing costs. The other loan has a 4.25% rate and no closing costs. With the higher rate, the no closing cost loan will cost you $43.00 per month more. This adds up to $15,500 more over 30 years. In this case, it will take 6.5 years to break even and recoup the $3500 in closing costs.

Takeaways on the No Cost Refinance Mortgage

Refinancing your mortgage with no closing costs largely comes down to an analysis of your personal financial situation, as well as your living situation. Do you have the cash available to easily pay the closing costs? Then you might want to go ahead and pay them. But if you think that you may only stay in the home for a few more years, a no closing cost mortgage can make sense.

]]>https://www.refiguide.org/ultimate-guide-refinance-mortgage-no-closing-costs-fees/feed/03113Should I Wait for Rates to Drop or Refinance Now?https://www.refiguide.org/wait-rates-drop-refinance-now/
https://www.refiguide.org/wait-rates-drop-refinance-now/#respondTue, 23 Jan 2018 18:12:01 +0000https://www.refiguide.org/?p=3098It is 2018 and interest rates are holding steady near record lows. Is it a good time to refinance your mortgage or should you wait for rates to drop? Well, interest rates for mortgage refinancing are a bit higher than a year ago, but they are still very low. Below is more information about whether… Read More »

]]>It is 2018 and interest rates are holding steady near record lows. Is it a good time to refinance your mortgage or should you wait for rates to drop? Well, interest rates for mortgage refinancing are a bit higher than a year ago, but they are still very low. Below is more information about whether you should wait or refinance your home now.

Home Refinance Market Perspective

We tend to think that home refinancing in 2018 is a good idea. If you are able to refinance your mortgage with a point lower rate, you can put 10% of your monthly mortgage payment back in your bank account every month. This means for every $1,000 you pay the lender, you could drop your payment by $100. This means you could save $12,000 over 10 years just by refinancing now.

Given that rates are in the 4% range still, even with a strong economy, you would expect most homeowners would refinance. But most homeowners are not budging. There are so many people not taking advantage of low rates that the US government has been rather puzzled. The Home Affordable Refinance Program or HARP is in its last year, and participation has really dropped.

But should you refinance? We understand that some people are worried about the costs of refinancing, especially after the mortgage crash of a decade ago. People also are afraid of the hassle of the underwriting process. It is true that underwriting got tougher after the crash, but it is faster and easier than a few years back. This is no reason to not try to refinance, especially if you have an FHA loan (see more details on FHA loans below).

Another common reason some people do not refinance is they are not able to get a rate that is 1% lower. This type of thinking is from decades ago when closing costs were a lot higher, and loans were much smaller. Back then, a typical loan was only $60,000 and the homeowner did have to lower their rate by 1% to save $1000 a year. But today, even a small reduction of .5% can result in saving more than $1000 a year in many cases. In fact, even a .25% decrease in rate can be beneficial.

Some people also do not refinance because they think they will have to wait many years before they recoup their closing costs. But today, closing costs are less than they used to be, and home prices are climbing nicely in many areas of the country. It can make sense to refinance in many more cases than people think. It is usually possible to recoup your closing costs in only a few years.

If you are thinking about refinancing in 2018, consider your major refinance options below.

Refinance with Conventional Loan

Property values as of 2018 have increased nicely in most of the US. This has increased the amount of equity many homeowners have. The more equity available, the easier time you will have refinancing. Borrowers who have credit above 700 or so and 20% in equity can usually refinance with a conventional loan this year. This is usually the least expensive of all the refinance options.

Should you pull the trigger on a conventional refinance? As of November 2017, the average interest rate on a conventional refinance was 4.29%. This is a very low interest rate when you consider the economy is doing well. But interest rates for conventional loans are still very low. Many experts think 30 year interest rates will increase in the near future, so we can make a strong argument to refinance soon. Even if rates were to drop a bit, we do not think it is worth the risk to wait.

Home Refinancing with a FHA Loan

You can do a refinance with FHA even if you do not have a lot of equity, a lower credit score and more debt than conventional lenders accept. FHA guarantees loans that private lenders issue to people with a less desirable credit profile. Even if you default, the lender will be reimbursed. You pay for this through monthly mortgage insurance.

With the US government backing your loan, mortgage companies may issue you a refinance loan with a very low rate; as of January 2018, the average rate for an FHA loan was just 4.26%. Borrowers who refinance these days with an FHA loan only have a credit score on the 640’s and 20% to 25% equity. The credit score for a FHA mortgage is very obtainable for most first time house buyers.

Should you opt for an FHA refinance? Again, we wonder if interest rates could possibly get much lower than they are today. FHA rates are actually a tick lower than conventional rates and are a really good deal for people with average credit, even with mortgage insurance payments. Talk to finance experts about 2018 FHA refinance guidelines.

Refinancing with a VA Mortgage

Probably the best option for refinancing in 2018, if it is available to you, is a VA loan. Designed for military veterans and current, active military, VA loans are backed by the Department of Veterans Affairs. You can have a low credit score and limited equity and still qualify for this refinance loan. In fact, in some cases, you can have zero equity and still get a new mortgage. You also do not have to pay for mortgage insurance.

Current records indicate recent borrowers only had 11% equity in their property, and even better, the average rate in November 2017 was just 4.01%! Now that is a sweet deal if you are eligible and qualify for a VA loan.

The bottom line is that we recommend refinancing soon because rates are probably lower than they should be. As the economy continues to take off, it is inevitable rates will rise. So, act fast!

]]>https://www.refiguide.org/wait-rates-drop-refinance-now/feed/03098Revealing Guidance for Home Refinance Loans in 2018https://www.refiguide.org/guidance-home-refinance-loans-2018/
https://www.refiguide.org/guidance-home-refinance-loans-2018/#respondThu, 18 Jan 2018 18:15:30 +0000https://www.refiguide.org/?p=3090It is 2018, and if you are thinking about buying a home or refinancing, the news is like a year ago. Rates continue to stay low, but they are expected to rise. Experts were saying the same a year ago, but we think it is even more likely this year for rates to go up.… Read More »

]]>It is 2018, and if you are thinking about buying a home or refinancing, the news is like a year ago. Rates continue to stay low, but they are expected to rise. Experts were saying the same a year ago, but we think it is even more likely this year for rates to go up.

The economy has shown very strong growth in the first year of the Trump administration, and the recent tax code changes should provide an economic bump as well. While these things are good overall for Americans and their bank accounts, strong economic news generally means higher mortgage rates for both new purchases and refinances.

Still, rates as of early 2018 are still fairly steady as the changes from the tax law have not hit yet. If you are in the market for a refinance, you may want to move soon because the Fed is going to raise rates, and mortgage rates will soon follow.

Take advantage of aggressive home refinancing programs advertised by the Nation’s top lenders.

Below is some advice for various types of mortgage program refinances for 2018.

Freddie Mac

Freddie Mac has tracked mortgage rates since the 1970’s. There have been very few mortgage rate streaks like what we have seen in recent times. Mortgage rates have stayed just below 4% on average for about six months. This does not seem to make a great deal of sense because the stock market is now above 25,000 and the S&P 500 is up 20% from a year ago. This type of strong growth usually increases mortgage rates as investors get out of bonds and go hard into stocks. But high rates have not hit yet.

As of now, rates are holding steady for conventional loans tracked by Freddie Mac, but it probably is time to pull the trigger on a refinance if you are thinking about it. If you want to refinance with a conventional loan, you will need to have at least 20% in equity for most lenders.

FHA

If you have an FHA loan from a few years ago, you may actually want to consider refinancing into a conventional loan as soon as you can. Rates are still low, and home prices have gone up a lot from three years ago. If you now have 20% equity, you could refinance into a conventional loan and get rid of your mortgage insurance.

If you are going to refinance into an FHA program, you are in luck: FHA-mortgage rates today are often lower than market rates because they are backed by the federal government. So, you can enjoy a refinance rate well below 4% in some cases in 2018. Even if your credit is damaged, you still can get a solid rate.

A good FHA program to consider is an FHA streamline refinance. This allows you to refinance your FHA loan into a lower rate with FHA. You do not need to go through traditional underwriting and they do not require a new appraisal, credit check or income verification. FHA refinance guidelines remain flexible and that is what, so many borrowers are looking for.

VA

VA loans also are a great deal right now with rates that are below market. This means you will almost certainly get a rate well under 4% for your refinance. You can qualify in many cases for a streamline VA refinance as well, which has the same rules as an FHA streamline refinance but with even lower rates.

According to Zillow, as of the January 2018, a VA loan for 30 years was right at 4%, while conventional loans were at 4.3%.

USDA

A USDA loan also can go through a streamline refinance right now and you can get a very low rate. No new appraisal is needed, and you do not even have to qualify with whatever your current income is. USDA will just need to confirm that you are still within program income limits. Check the 2018 USDA loan requirements today.

General Mortgage Rate Predictions for 2018

The clear majority of rate forecasters are saying that rates will rise in 2018. Below are some of the predictions for conventional rates for this year from various sources.

Freddie Mac: 4.4%

Mortgage Bankers Assn.: 4.6%

Kiplinger: 4.4%

National Assn. of Home Builders: 4.2%

We think that rates for both new loans and refinances will rise this year because given the strong economic activity we are seeing, rates are too low. It is inevitable they will go up. During the last boom, rates were around 6.5%. Rates are lower than they should be and will soon go up.

Takeaways on Choosing the Best Home Refinance Mortgage in 2018

There are a number of reasons that mortgage interest rates still are below where they should be. Many experts think that inflation is low, and this is causing rates to stay down. But even the Fed has not fully been able to explain why rates are not higher. There is no question though that rates are under where they should be, and this is temporary. As the economy gathers steam this year, rates will go up. It is very unlikely that rates will be lower in a year than they are now, so a refinance immediately makes sense to us.

]]>https://www.refiguide.org/guidance-home-refinance-loans-2018/feed/030904 Amazing Home Buying Grants for 1st Time Home Buyers in the U.S.https://www.refiguide.org/4-amazing-home-buying-grants-1st-time-home-buyers-u-s/
https://www.refiguide.org/4-amazing-home-buying-grants-1st-time-home-buyers-u-s/#respondThu, 18 Jan 2018 17:56:58 +0000https://www.refiguide.org/?p=3085Buying your first home can be overwhelming in many ways. There are so many decisions to make an many people do not realize that there are home buying grants available in all 50 states. One of the most important of course is getting approved for a mortgage and saving up for a down payment. The… Read More »

]]>Buying your first home can be overwhelming in many ways. There are so many decisions to make an many people do not realize that there are home buying grants available in all 50 states. One of the most important of course is getting approved for a mortgage and saving up for a down payment. The down payment as well as closing costs are often the two biggest things that make buying a first home so challenging. Without any equity to bring to the closing table, most people need to just save up the money to get the deal closed.

2018 is a great year to secure attractive home buying grants.

How hard is buying a first home? Statistics suggest that 80% of millennial renters want to buy their first home but say they cannot afford it. But what they may not know is that there are many first-time home buyer credit programs and grants available for those who qualify. You may be able to qualify for one of these programs so that you can afford to buy a home faster than you thought.

#1 Good Neighbor Next Door

The Good Neighbor Next Door program that is sponsored by HUD offers help in buying a first home to people who work in law enforcement, firefighting, teaching and the EMT field. This program allows the buyer to get a discount on the property as high as 50% off the listed price. The homes are located in HUD-designated revitalization areas.

Many of these homes are available for a $100 down payment if you are using FHA-mortgage financing. You would have to put more money down if you used conventional financing, so FHA lending is highly recommended for this program.

By using the HUD website, you can look for properties that are eligible in your area. A requirement for the program is that you will live in the home for at least three years. Note that these homes are only listed for seven days so it is important to act quickly.

A big plus of this program is that if you sell the home after three years, you get to keep all of the profits and equity for yourself. You do not have to pay back HUD.

#2 Dollar Homes

HUD does offer some fixer upper homes for as little as a dollar. These are homes that are picked up by FHA through the foreclosure process. Of course, this is a small number of houses. The last time we checked on the site, there were only a few homes. There also will be homes listed on this site for a few thousand dollars. If you consider a home on this list, it is important to have it carefully reviewed by a home inspector.

#3 Native American Direct Loan

For the last 25 years, the Native American Veteran Direct Loan program has assisted veterans who are of Native American descent as well as their spouses to purchase homes on federal trust lands. The VA is the lender.

If you and your spouse are eligible, you do not have to make a down payment at all or pay for private mortgage insurance. This is not a grant program per SE, but those who qualify can get no-money down mortgage loan, so this program is a huge benefit for the qualifying first-time buyer. Other benefits include lower closing costs, low interest 30-year, fixed rate loan, and the ability to reuse the benefit more than once.

#4 State Specific Grant Programs

There are many other grant programs available in the US for first time home buyers, but many of them are specific to the state. For example, in Texas, there is the Homes for Texas Heroes Loan Program. This program offers buyer assistance for police, teachers and correctional officers. It also may be used by firefighters, veterans and EMS personnel.

The program may feature these benefits for first time home buyers:

Down payment assistance of up to 5% of the loan amount

Do not have to be a first-time home buyer to qualify

Do not have to live in the home for a certain time period

The down payment help does not have to be repaid

The loan is a 30-year fixed rate mortgage in many cases, but other options are available

This program also may be available to other buyers who have low to moderate incomes.

This Texas program also offers eligible buyers a Mortgage Credit Certificate or MCC. Those who qualify for the above program may get their MCC for free – a $500 value. The MCC comes with these very attractive benefits for heroes in Texas who qualify:

Save as much as $2,000 per year as a special tax credit based upon the mortgage interest you paid. This can save you thousands of dollars over the life of the loan.

You have to be a first-time home buyer to quality, which means you have not bought a home in the last three years

No minimum credit score is required

This certificate can be used with the down payment assistance program above

If you are considering a state or local home buying assistance program, it is important to note if the assistance is a grant or a loan. Some of these down-payment assistance programs will require you to pay back the money over time.

Another issue to consider is called tax recapture. Some programs feature a recapture tax if you sell the home at a profit before a certain number of years go by. So, if you get some gains from the home’s increased value, you could get taxed to make up for the break you got when you purchased.

]]>https://www.refiguide.org/4-amazing-home-buying-grants-1st-time-home-buyers-u-s/feed/030856 Easy Steps to Get Your FHA Loan Application Approvedhttps://www.refiguide.org/6-easy-steps-get-fha-loan-application-approved/
https://www.refiguide.org/6-easy-steps-get-fha-loan-application-approved/#respondThu, 18 Jan 2018 17:24:04 +0000https://www.refiguide.org/?p=3081People who want to own their own home are at the heart of the American Dream. Some might think that after the last financial downturn, you need to have a high credit score to buy a home. This is actually not really true. It did get more difficult to buy a home with poor credit… Read More »

]]>People who want to own their own home are at the heart of the American Dream. Some might think that after the last financial downturn, you need to have a high credit score to buy a home. This is actually not really true. It did get more difficult to buy a home with poor credit after the financial crash. But these days, it is possible to get a home loan through the Federal Housing Administration program without a great credit score. Regardless of the flexibility that FHA offers with home financing in 2018, it is imperative to check all the boxes properly before submitting a FHA loan application to a HUD-approved mortgage lender or bank. Before making offers on the house of your dreams, you need to understand the FHA mortgage requirements to decide if is the right fit.

FHA insures many of the home loan approved in America today. FHA does not actually lend you the money; the agency simply provides a guarantee for the lender who issues you the mortgage. If the borrower does not pay the mortgage, FHA will reimburse the mortgage lender. Consequently, more mortgage lenders are likely to offer loans and credit to people with marginal incomes and credit scores.

You still need to have a minimum credit score to get approved for a FHA mortgage. The absolute bear minimum credit score for a FHA loan is 500. That is a very bad score; there are people who have had several foreclosures in the last three years that do not have a score that low.

A 500 score will make it difficult however to get a loan. Most lenders will not work with someone with that low of a score, but the few that do will likely require a 5 to 10% down-payment. You are better off if you have a credit score of at least 580. That credit score is the minimum required to get the lowest possible down payment. It’s truly amazing that a borrower with a 580-credit score can buy a home with a 3.5% down-payment at a competitive interest rate.

#2 Steady Financial History Recently

A major factor with FHA is your current financial stability. FHA understands if you had a negative event that damaged your credit. You might have lost your job or had your hours cut. This could lead to missing payments on a home loan or car payment. Maybe you even had a foreclosure.

These events by themselves do not preclude qualifying for a FHA loan. What the Federal Housing Administration wants to see is that you are back on your feet financially. The agency and the lender want to see that you have been making your housing, car and other debt payments on time for a year or more. You must demonstrate to the underwriter that you are able to afford the FHA home loan that you are applying for. The bank, underwriter and ultimately the Federal Housing Administration want to make sure that you are not a high risk for delinquencies or a default.

If you can show that you are financially stable after the financial problem you suffered, you could have an FHA loan approval in your future.

#3 Fully Documented Income

There is a good chance that someone with average income and credit score can get a home loan in the United States of America in 2018.. However, the chances will just about vanish if you cannot clearly document your income on paper. One of the major problems that led to the mortgage meltdown of 2007-9 was there were far too many loans given to people with undocumented income sources. These were called ‘no doc home loans’, and it is now very difficult to get a loan without full income documentation.

Lenders are legally required in the US to make a full good faith effort to make sure you can afford your loan payments. This means you need to provide the following documents in most cases in your FHA loan application:

At least two or three months of bank statements.

W-2s going back two years

Tax returns for the last two years

At least a month of two of pay stubs

For the self-employed, you need to show tax returns for two years, and a to date profit and loss statement for the current year

Source of down payment – you can get your down payment in the form of a gift, too. But this also needs to be fully documented.

#4 Clear CAIVRS

CAIVRS is an acronym for the federal government’s Credit Alert Interactive Verification Reporting System. This is a federal database that shows people who are defaulting on federal loans, or owe back taxes. If you are on this list, you need to get it cleared before you can get a loan.

If you owe back taxes, it is ok: You simply have to set up a payment plan with the IRS and make your payments on time. In this way, you can still get an FHA loan with back taxes owed.

#5 Down Payment of 3.5%

A major benefit of the FHA program is that you do not need to have much money to put down. With only a 580-credit score, you may be able to put down as little as 3.5%.

By putting down so little money, it makes it much easier to buy your own home. You can save that money to fix up the property.

#6 Acceptable Debt to Income Ratio

FHA has flexibility on your debt to income ratio to be approved for a home loan. However, you will need to have a front-end ratio – just your total monthly housing debt payments – that do not exceed 43% for those with under a 580-credit score. If you have a score above 580, you should be able to have a higher DTI in many cases.

You may be able to qualify for a higher DTI if you have more down payment, a higher credit score, or higher cash reserves.

You can probably get approved for an FHA loan if you follow the above guidelines carefully, and enjoy the American Dream in 2018!

]]>https://www.refiguide.org/6-easy-steps-get-fha-loan-application-approved/feed/030816 Appealing Options to Finance Home Remodeling and Repairshttps://www.refiguide.org/6-appealing-options-finance-home-remodeling-repairs/
https://www.refiguide.org/6-appealing-options-finance-home-remodeling-repairs/#respondThu, 18 Jan 2018 16:50:51 +0000https://www.refiguide.org/?p=3078Anyone who owns their home probably has a list of home improvements they want to do. Whether it is renovate the kitchen, add a bathroom or update the A/C system, most of us have plenty of things on our wish list. What often stands in the way is money, naturally. Many home improvements cost thousands… Read More »

]]>Anyone who owns their home probably has a list of home improvements they want to do. Whether it is renovate the kitchen, add a bathroom or update the A/C system, most of us have plenty of things on our wish list.

What often stands in the way is money, naturally. Many home improvements cost thousands of dollars. But there is good news: There are many realistic ways to come up with the money for a home improvement project. With easier credit standards in 2018, fixing up your home the way you want might just be easier than ever.

However, experts advise you to keep a few things in mind before you even consider using money or getting a loan to do a home renovation. They say the biggest error people make is they finance home improvements for a period that is longer than improvements will last. If you take out a loan for 20 years to pay off a home improvement, you may still be paying mostly interest by the time the renovation needs to be replaced. Fortunately, in today’s economic environment there are a handful of home improvement loan programs to consider.

Ask lenders about the new home remodeling loans that are offering borrowers more money in 2018.

Below are the top options for paying for your home modeling and repairs:

#1 Use Your Own Cash

If you can, it is best to pay cash for your home improvements. You do not have to worry about additional monthly payments and you will not affect the equity on your property. If you can afford to wait, it is always best to save up the money for a few years and pay for the project with all cash. If this is hard, consider breaking down your home improvements into manageable chunks. For example, you can break down the kitchen upgrade to several chunks, such as flooring, counters, cabinets and appliances. As you get the cash, you can move on to the next stage of the project.

#2 Do a Cash Out Refinance

If you do not have the cash to do the home improvements you want, doing a refinance for cash out may be the way to go. Mortgage interest rates in 2018 are very low in the range of 4%. Even though the economy is taking off and the Fed has raised rates and plans to do so again soon, you may be able to score a lower interest rate on a refinance than your current rate.

It is important, however, to make sure you are not financing your home improvements for a longer period than the improvements will last. If you have to finance your kitchen for 25 years and have to redo it in 15 years, this is not a good use of your equity.

#3 Get a Home Equity Line of Credit (HELOC)

If you do not want to refinance your first mortgage, consider a home equity line of credit or HELOC. With this line of credit, you will draw money out of your property as it is needed and pay it back as you like. There are minimum monthly payments that will eventually increase after the draw period ends. This is the time in which you may take out cash, which is usually five or 10 years. After that, you must start paying back principal as well.

You can typically take out up to 80% or 85% of the home’s value, minus what you owe on the first mortgage.

If you are unable at any point to pay that loan, you could lose your home. Thus, make certain that you will have sufficient income in several years to continue to make those loan payments.

HELOCs have a variable interest rate after the initial fixed period of a few months or years. They can and often do go up after that. The interest rate initially is lower than a home equity loan, and therefore most people choose the line of credit option over a home equity loan.

#4 Look at Home Equity Loans

A home equity loan is also based upon your home’s equity. But in this loan, you borrow your equity with a fixed payment schedule that does not change. It is common to have a 15-year loan, but a five or 30-year term is also possible. A home equity loan carries a higher rate than a HELOC, but you may prefer it if you feel nervous about an adjustable interest rate. You may see HELOCs in the range of 4.5% these days, and home equity loans about one point higher. If you have less than perfect credit, consider a home equity loan with fair credit.

The major advantage with a home equity loan is you will never have to worry about payment shock; you know exactly what the payment will be for the entire loan term.

#5 FHA 203k Loan

The Federal Housing Administration allows you to do a 203k-FHA loan which can finance up to $30,000 or $35,000 of home repairs. It is not based upon the equity in the home. Note that you will have to carry mortgage insurance for the life of this loan.

#6 Credit Cards

It is possible to cover smaller renovations with your credit cards, but it is not a good idea to finance large projects over years with high interest credit. Some home owners choose to buy materials with credit cards because they want the rewards points.

If you choose wisely, home renovations can pay you back handsomely when you sell the home. Consider using one of the above options to fund your home renovation project today.

]]>https://www.refiguide.org/6-appealing-options-finance-home-remodeling-repairs/feed/030788 Tips to Home Refinancing When Mortgage Rates Risehttps://www.refiguide.org/tips-home-refinancing-mortgage-rates-rise
https://www.refiguide.org/tips-home-refinancing-mortgage-rates-rise#respondSat, 13 Jan 2018 01:18:31 +0000https://www.refiguide.org/?p=3074Do you want to refinance your home but are worried about interest rates going up? This could be a valid concern in 2018 as rates are probably going to rise as the economy gathers steam. But don’t worry, you still have time to refinance. If you follow our tips below, you will have a better… Read More »

]]>Do you want to refinance your home but are worried about interest rates going up? This could be a valid concern in 2018 as rates are probably going to rise as the economy gathers steam. But don’t worry, you still have time to refinance. If you follow our tips below, you will have a better chance of refinancing effectively in a generally rising rate environment.

#1 Stop Waiting for Home Refinancing Rates to Fall

As of early 2018, rates are still in the range of 4%. Many people are surprised about this in the mortgage industry. Housing prices are going up and unemployment is low. This is usually when mortgage rates start to go up. There is no question that as of right now, rates are too low for market conditions. But we would not expect this to continue; the Fed is promising rate hikes and the economic outlook for 2018 is fairly strong.

Some estimates we have seen have home mortgage refinance rates in the mid-4s this year, so you probably should make your move soon.

Don’t miss out on low mortgage rates available for home refinancing this year.

#2 Be Ready in case Interest Rates Do Fall

It is wise to get your refinance application turned in soon. This is not just because rates may rise. It is common for there to be a backlog of refi applications if rates start to go down. If you have to get in the back of the line with your application, you could miss the drop in rates. It doesn’t hurt to follow the financial news so you aware of the trend for the current mortgage refinance rates.

You are not required to lock in your interest rate when you do your refinance. You can watch the market and decide when is the right time to lock.

But if you are not quite ready to submit your application, make sure you keep your credit score high and have all of your financial documents ready to go to submit an application quickly. These documents include your last two tax returns, pay stubs and bank statements.

#3 Make an Effort to Establish Good Credit Scores

It may be difficult to get a refinance done fast if your FICO score is too low. Your credit score will play a major role in the interest rate you can get with your refinance. Just because rates are under 4% does not mean you will be able to get that rate.

The good news is that you can quickly increase your credit score by 50 points or more by doing things such as paying off credit card debt. Also, pay your bills on time and try to keep your credit card debt no more than 1/3 of your limits.

#4 Use Increasing Home Prices to Your Benefit

Home values are going up, even though interest rates at the moment are not showing much movement. Now could be a good time to use your home’s equity with a cash refinance loan. However, you should use caution with how your equity is spent. The best thing to do with equity is to use it to invest in things that will pay you back. Making home improvements is the most common use of home equity with a cash out refinance. Some home improvements will pay you back when you sell the home.

#5 Don’t Rule Out Home Refinancing with a Variable Interest Rate

A smart move to consider is refinancing into an adjustable rate mortgage when rates are rising. The rates for an ARM are lower than those for fixed rate mortgages. An ARM can really make sense if you are planning to sell your home within a few years before the rate can possibly reset at a higher level.

#6 Consider Refinancing with a 15-Year Term

Refinancing your mortgage into a shorter-term loan can give you a lower rate than a 30-year mortgage. The shorter term of the new loan also means you will pay less in interest over the loan’s life. However, note that you will pay a higher payment with a shorter-term loan. If you have the cash-flow to make the higher payment and a committed vision, we recommend considering a 15-Year mortgage refinance.

#7 Paying for Points on Your Home Loan May Be Wise

Before your new mortgage closes, you can pay points on the loan so that you can lower the interest rate throughout the life of the mortgage. If paying points up front can substantially lower the rate in a rising environment, this can be a smart move.

One point paid equals one percent of the amount of the loan. If rates are volatile, you may have to pay more for your points. Still it can be worth it if rates are on the way up.

#8 Refinance Out of an ARM or HELOC

If you are in a rising rate environment and have a HELOC credit line or an ARM, you could be facing a payment shock with higher rates. Refinancing into a fixed rate loan can lock you into a higher but steady rate that you know will not go up.

People with a home equity line of credit really need to be on the look out for rising interest rates. When the five or 10-year draw period ends on the loan, you have to start paying back both interest and principal. If rates go up on top of it, your payment really could skyrocket. Try contacting the bank and see if you can move into a fixed rate credit line, or possibly converting it to a home equity loan with a fixed rate.

Takeaways on Refinancing When Mortgage Rates Are Rising

If interest rates are going up or are about to, you should consider the above tips to save yourself from paying a lot more in interest each month.

]]>https://www.refiguide.org/tips-home-refinancing-mortgage-rates-rise/feed/03074How to Buy a Short Sale in the Trump Erahttps://www.refiguide.org/buy-short-sale-trump-era/
https://www.refiguide.org/buy-short-sale-trump-era/#respondFri, 12 Jan 2018 16:36:19 +0000https://www.refiguide.org/?p=3068Some home buyers looking for a good deal in the Trump era of rising home prices may consider buying a short sale. If you are looking at a property that is listed well below the market value for that neighborhood, you should talk to your real estate agent to determine if it is a short… Read More »

]]>Some home buyers looking for a good deal in the Trump era of rising home prices may consider buying a short sale. If you are looking at a property that is listed well below the market value for that neighborhood, you should talk to your real estate agent to determine if it is a short sale. These deals can be a bargain, but getting one to close on a timely basis can be challenging. So, before making an offer on buying a short sale, make sure you know what you are doing. This article will describe how to buy a short sale home in the Trump era and how to get the best deal.

Overview on Buying a Short Sale in 2018

A short sale property is one where the lender is willing to take a discounted payoff to release the existing mortgage on the home. Now just because the property is listed with possible short sale terms does not mean the mortgage lender will take your offer, even if the seller himself accepts it. This is because the seller must qualify for the short sale. One of the key parts of making a short sale work is working with agents who are experienced on the buy and sell side of short sales.

Maximize New Investment Opportunities in 2018 and Buy a Short Sale While Rates Are Low!

Also, noted that the seller does not need to be in default on their mortgage for the lender to consider a possible short sale. The lender could take a short sale if the seller is current on payments, but the value is less than the mortgage. The seller may owe far more than the home is worth, so the discounted price you see could bring the price more in line with the current market values.

Look at Public Records

It is important to do a lot of research before you offer to purchase a short sale. Your agent can determine who is on the title for the property, whether a foreclosure has been filed and how much is owed to each lender. This is important because you will then be able to make a reasonable offer. The banks are not under pressure to accept a short sale, so your offer needs to be within reason.

If the home has two loans on it, there could be an issue. The first mortgage lender position is over the second lender, unless the second lender has no interest in foreclosing. If the seller has a balance of $160,000 owed on the first and $40,000 on the second-mortgage, offering $160,000 leaves no money for the second loan. The first must give up something to the second to get cooperation. But it may not be as much as you think; in some cases, $3,000 or $6,000 could be enough.

Work with Short Sale Experienced Agents

If the listing agent has never done a short sale, that is not good, but it’s a major issue if your own agent has never done a short sale. It is imperative to not go into a possible short sale without an experienced agent on at least your side of the transaction. Short sales are always complicated, and you want an agent representing you who can deal with those surprises and complications.

A classic issue with short sales is for last second problems to crop up with paperwork with one or both lenders involved in the deal. This can prevent the deal from closing on time or closing at all.

Qualify the Property and Mortgage Lender for a Possible Short Sale

The lender will probably not agree to the short sale unless the owner of the home has no equity and cannot pay the difference between the sales price and the current loan. The seller will need to give a hardship letter to the lender, and sellers may have to pay taxes on the debt that has been forgiven.

One thing to watch out for is anyone in the transaction suggesting anything illegal to get the deal done. For example, sellers have been known to demand the buyer give them cash under the table (a bribe) to get the right to buy the property. This is completely illegal and is fraud. Do not get involved in a possible short sale where the seller is wanting to do anything illegal to get the deal done. In most short sales, the seller does not receive any money because the mortgage lender is operating at a loss.

Make sure you investigate your options on a conventional and FHA loan for a short sale. In most cases, you will need to find a private money loan to finance a short sale.

Submit Documents and Offer to Purchase a Short Sale

After the seller accepts the offer, the listing agent forwards the offer to the lender to be approved. There is no deal unless the lender accepts it. The lender may want a higher offer from you. The lender also will want to see that you are pre-approved for the mortgage. You should have a pre-approval letter that is dated within the last 30 days.

The offer should be contingent upon the lender accepting the deal. Give the lender a certain period to give you an answer, and you should be able to cancel the deal if you want to. The decision from the lender can take from a few weeks to a few months.

Getting a short sale to the closing table in a reasonable time is a challenge. But great deals can be had when considering buying a short sale, so work with an experienced real estate agent to get a good short sale done in the Trump era.

]]>https://www.refiguide.org/buy-short-sale-trump-era/feed/03068Homeowners Guide to Cash Out Refinance Loanshttps://www.refiguide.org/guide-cash-out-refinance-loans
https://www.refiguide.org/guide-cash-out-refinance-loans#respondWed, 03 Jan 2018 00:13:35 +0000https://www.refiguide.org/?p=3024Are you thinking about getting a lower interest rate on your mortgage, and pulling out cash to renovate your home? If so, you may be a good candidate to do a cash out refinance loan in 2018. Doing this type of refinance loan can get you a lower rate and get you the cash you… Read More »

]]>Are you thinking about getting a lower interest rate on your mortgage, and pulling out cash to renovate your home? If so, you may be a good candidate to do a cash out refinance loan in 2018. Doing this type of refinance loan can get you a lower rate and get you the cash you need for remodeling your home or pay for another large expense.

Get up to speed on the new tax laws so you can maximize deductions with the cash out refinance mortgage in 2018.

When you do a cash out refinance at a lower rate, it is possible for your payment to not even change that much; this depends upon how much you are pulling out and the interest rate. But if you are thinking about a cash out refinance mortgage in 2018, here are some important guidelines to keep in mind:

Cash Out Refinance May Be Better than a HELOC as Tax Rules Have Changed

When you take equity out of your home, you can either get a line of credit (a second mortgage) or do a cash out refinance. With a line of credit, you can get either a Home Equity Line of Credit or HELOC. The HELOC line works like a credit card with a specific outlined amount made available as a ‘line of credit’.

A HELOC can be useful for some people who want to pull money out over a longer time. But note that the interest rate on a HELOC varies, so it will only be locked in for a limited time. A home equity line of credit can also be reduced or terminated if your credit situation chances. It also can be reduced if the value of your home drops. If you are interested in a second mortgage with a fixed interest rate, you also can get a home equity loan, which is a fixed lump of cash that you get at one interest rate for the life of the loan.

The cash out mortgage refinance allows you to both get a lower interest rate on your first mortgage, and pull out cash at a fixed interest rate. This option is often superior to a HELOC because of the fixed rate. It also is preferable if you can get a lower rate on your first mortgage with the refinance. Make sure the loan officers you are considering understand the cash-out refinance rules for the new year.

Depending upon your level of income, it may be a good idea as you do a cash out refinance to get a 15-year mortgage. If you are able to get a seriously lower interest rate, the increased payment might be better than you think. On some 15-year loans, you can get a rate that is .5% lower than a 30-year loan. This may allow you to save thousands of dollars in interest each year, and $100,000 over the life of the loan.

Keep Track of Mortgage Interest You Pay

For most people with homes worth less than $750,000, you can tax deduct your mortgage interest on first and second mortgages when you do your taxes. When you do your cash out refinance in 2018, you also should be able to write off the interest, unless your home is worth more than $750,000 under the new federal tax laws.

Doing Renovations? Conduct Research

Be sure that you spend your equity on home projects that will pay you back nicely when you sell. Consider doing, for example, a moderate kitchen upgrade for $25,000. This will almost certainly result in a nice pay off when you sell.

Other good options to consider is renovating your master bath, putting in a new bathroom, doing a family room extension or adding a sun-room, and making windows more energy efficient.

Considerations for Refinancing to Get Cash Back

When you pull your cash out of your home when doing a refinance, it is important to consider some of the following points:

Use your equity for things that will pay you back. Most Americans pull cash out when doing a refinance to do home renovations. This is generally a wise move, but be careful about doing renovations that will not pay you back when you sell. It can be a mistake, for example, to spend $100,000 on a kitchen upgrade for a $250,000 house. If the upgrade is much nicer than the average in your area, it won’t pay you back. You also may consider investing the money you pull out in real estate investments that make you a profit each year.

Consider closing costs. Any time you get a new mortgage of any kind, you have to pay closing costs. So, keep this in mind when you start the cash-out refinance shopping process. Expect to pay 3-6% in closing costs.

Higher risk of foreclosure: If you pull out cash on your first mortgage, you usually will be increasing your monthly payment. There are many examples in the last decade of people who pulled out cash with a refinance and fell behind on mortgage payments. If you lose work, will you be able to handle the higher mortgage payments?

Be wary of using equity to pay off debt. This can be a poor move because it may encourage bad financial behavior. If you just run up your credit cards again, which is common, you just have a new debt to pay off in addition to the higher mortgage payment.

Tax Rules for Cash Out Refinance Loan in 2018

As home prices continue to rise, the amount of home equity that home owners have reached an all-time high at the end of 2017. It was reported by CNBC that 42 million homeowners with mortgages had more than $5 trillion in equity in their property.

This is a full $3 trillion more than they had when the housing market hit the bottom in 2012 after the mortgage meltdown and financial crisis. Estimates are that the $5 trillion in equity is available to borrow because it is under the standard 80% of debt to value against the home. Most lenders allow you to borrow up to 80% of debt to value in the property. Now it is estimated that 80% of homeowners have equity in their home they can use, and only 2.5% of borrowers are still underwater on their mortgages.

So, if you have equity sitting in your property that can be used, how should you tap it? There are two major ways to do it. The first is to simply refinance your first mortgage into a larger loan, hopefully with a lower interest rate. Refinancing your loan and taking out cash may make sense if interest rates today are lower than the rate that you have now.

Another reason to consider a cash out refinance today is the recent tax law changes. For your primary home, you can still deduct the interest that you pay on up to $750,000 of mortgage debt on your first mortgage. This has been decreased from $1 million, but most Americans will still be able to write off their first mortgage interest when they do a refinance.

Many experts think doing a cash out refinance is the best option if you can get an interest rate that is the same or lower than your current interest rate. The tax advantages of doing the cash-out refinance of the first mortgage make it a logical choice as well.

In the past, the other major option was the home equity line of credit or HELOC. This is a second mortgage that is in addition to the first mortgage you have. It is essentially a credit line with your home equity as the source of the credit, working very much like a credit card but with a much lower interest rate.

The HELOC loan of credit often are chosen by people who are happy with their first mortgage interest rate but still want to pull out cash. However, under the new tax law taking effect in 2018, the interest paid on second mortgages, including HELOCs and home equity loans, is no longer tax deductible. Before, borrowers could deduct the interest on second mortgages up to $100,000 of debt. Many experts in the mortgage industry think that homeowners who are still itemizing under the new tax law will probably opt to do more cash out refinances instead of second mortgages. This is especially true for people who have lower first mortgage balances that have higher amounts of equity.

With mortgage interest rates still very low even with higher home prices, cash out refinances are getting more popular, and even more so with the tax law changes disfavoring second mortgage loans. Borrowers have been on average pulling $68,000 in equity from their homes for a total of $26 billion in the third quarter of 2017. Cash out refinances are now 62% of all the refinances being done. But it is still much less than during the boom years of the housing industry in 2005 when people were using their homes as ATMs.

If you are considering pulling cash out with a refinance, keep in mind that lenders are more risk averse today than those days. Underwriting is stricter, and it is rare to be able to borrow more than 80% or 85% loan to value. Borrowers are showing more restraint, too. More people are reluctant to tap their home equity and how much they tap if they decide to do it.

Another factor of the tax law affecting cash out refinances is that home values could be affected. It is possible home values in some higher end markets could fall and would erase some of the equity people have today.

Under the new tax law, homeowners only may deduct $10,000 in property taxes. In high tax states such as California and New York, this could cause home prices to fall. Homeowners who have loans more than $750,000 may want to talk to a tax adviser to determine if a cash out loan refinance makes sense from a tax perspective.

Takeaways on New Tax Rules on Cash Out Refinance Loans

Doing a cash out refinance in 2018 makes a bit more sense than it did a few years ago, given the changes in tax laws. If you are able to get a lower interest rate, it probably makes more sense to refinance your first mortgage than to take out a second mortgage. The way mortgage debt is treated tax wise with a second mortgage make it less of a financial benefit than taking out the same equity with your new first mortgage.

]]>https://www.refiguide.org/guide-cash-out-refinance-loans/feed/03024 Is PMI Tax Deductible in 2018?https://www.refiguide.org/pmi-tax-deductible
https://www.refiguide.org/pmi-tax-deductible#respondTue, 02 Jan 2018 23:46:41 +0000https://www.refiguide.org/?p=3018Many home buyers are wondering if private mortgage insurance or PMI is still tax deductible in 2018. With all of the media publishing articles about the year-end GOP tax reform bill, it is imperative that you get the facts on tax deductions for PMI before committing to a home loan in the new year. The… Read More »

]]>Many home buyers are wondering if private mortgage insurance or PMI is still tax deductible in 2018. With all of the media publishing articles about the year-end GOP tax reform bill, it is imperative that you get the facts on tax deductions for PMI before committing to a home loan in the new year. The good news is that mortgage insurance, also known as, PMI can still be deducted for tax purposes in 2018, but keep reading to understand all the details and new laws on PMI and tax deductions for homeowners this year.

When you think about the many costs that are associated with buying a home, such as the down payment, closing costs, appraisal fees, legal fees, moving costs and so on, it is not something that you take lightly. And if you got a home loan that was 80% or more of the purchase price, you also probably had to buy private mortgage insurance or PMI, as well.

PMI is the reason that brokers and lenders are willing to take a risk on lending you 80% or more of a home’s value. It protects the mortgage lender if you cannot make your payments and default on the loan. If you do default on the loan, the lender is paid back part of the mortgage principal. This is done so that more lenders are willing and able to lend money to people without very large down payments.

Your PMI payment is usually as part of your monthly mortgage payment. It is typically an extra $100 or $200 per month on top of your loan, depending upon the value of the home, your personal credit and other factors.

While many people do not like the idea of PMI, it is worth remembering that private mortgage insurance is the ‘price’ you pay for being able to get a home loan with 20% or less down. Without PMI, most buyers would need to come to the table with 30%, 40% or 50% of the home’s value; this is beyond the means of most Americans.

But there is one big benefit to PMI that you may not be aware of: It is tax deductible for many Americans. This goes back to 2007, when deducting your PMI payments from your taxes was allowed via the Tax Relief and Health Care Act. It was applied to PMI insurance policies that year for most home owners, and has continued ever since. It was done in part to help the housing market to recover from the mortgage crash of a decade ago.

Can I deduct PMI or MIP (mortgage insurance premium)?

According to Turbo Tax, the mortgage insurance deduction began in 2006 and was extended by the Protecting American from Tax Hikes Act of 2015.

For most Americans today, PMI is tax deductible. It is required that the loan was made in 2007 or later, and it has to be either for a primary residence or a second home that you are not renting out. Congress recently passed a bill amending the rules for tax deductions and private mortgage insurance. Read about the Mortgage Insurance Tax Deduction Act of 2017.

Also, your adjusted gross income cannot go over $109,000. Once your income rises to this level, the PMI deduction begins to be phased out at $100,000 AGI and higher. It is totally removed once you go over $109,000 per year AGI. If your AGI is in the range of $100k to $109k, you should use the worksheet that is with Schedule A of your income tax form to determine the level that can be deducted from your federal tax obligation. Remember that borrowers with less than $100,000 AGI can deduct all of their PMI expenses.

The PMI tax deduction works for home purchases and for refinances. Depending upon the level of your adjusted gross income, you may be able to deduct mortgage insurance for FHA and USDA loans as well. It’s no wonder why we are receiving so many emails asking whether mortgage insurance and PMI is tax deductible in 2018.

Just because PMI is still tax deductible in 2018, does not mean that you should keep paying it every month. It makes sense to see if you can qualify for a mortgage with a lower interest mortgage without paying PMI. Find out if closing costs are tax deductible on a mortgage refinance this year.

To claim your deduction on your taxes, you have to itemize your personal deductions on Schedule A; this is included with the IRS form 1040. If you prepay any amount of your PMI, you may not deduct all of your prepayments in the year that you paid. You have to wait to make your PMI deduction in the tax year that the premium covers.

Note that the PMI tax deduction is not permanent; it has to be renewed by Congress every year. As of 2018, the tax break is still in effect. It appears that Congress in 2017 has renewed the PMI tax deduction for 2018. But people who are buying homes in the future should always check with their CPA to determine if the PMI tax deduction is still in effect.

This has been the only major tax break for homeowners that can potentially be cancelled by Congress. The deductions for mortgage interest are safe for now up to at least $500,000 homes, and this could be $1 million, depending upon tax reform that is being debated on Capitol Hill at the end of 2017. Real estate tax deductions are safe for most homeowners, but the current tax reform bill may end up canceling the real estate tax deduction for amounts over $10,000 per year.

Remember to Check Your Home Value Yearly

If you have PMI, you should remember to check roughly what your home is worth every year, as well as home much equity you have in the home. You will not need to pay for PMI any more once you have 20% of equity in the property. The only exception to that is recent FHA loans; if you put 3.5% down, you cannot cancel PMI. FHA loans with at least 10% down can cancel PMI after 11 years.

For others, you should verify if you have hit at least 20% equity in your home. It would be unusual for a mortgage lender to voluntarily cancel your PMI. You will generally are going to need to check on it yourself and request in writing that PMI be cancelled.

To get a current value, the best way is to have an appraisal done; this is the most accurate way to gauge value. Failing that, you can check online to get an idea of what similar homes are worth in your area. Once you are confident that you have 20% equity, you should talk to your lender to get rid of that PMI payment.

If you are tired of paying mortgage insurance, consider programs that include lender paid PMI, as there may be no-PMI mortgage options available that would not require paying monthly PMI even with no equity..

]]>https://www.refiguide.org/pmi-tax-deductible/feed/03018How the New CFPB Director Will Help the Mortgage Industryhttps://www.refiguide.org/new-cfpb-director-help-mortgage-industry
https://www.refiguide.org/new-cfpb-director-help-mortgage-industry#respondThu, 28 Dec 2017 03:09:11 +0000https://www.refiguide.org/?p=3008Last Month, President Trump ousted Richard Cordray from the CFPB. While the bureau and the administration are still fighting over who the new interim director will be, a major change in direction at the agency is assured. This is most likely good news for the housing and mortgage industries. Mortgage industry experts say that whoever… Read More »

]]>Last Month, President Trump ousted Richard Cordray from the CFPB. While the bureau and the administration are still fighting over who the new interim director will be, a major change in direction at the agency is assured. This is most likely good news for the housing and mortgage industries.

Mortgage industry experts say that whoever leads the CFPB in the coming years should correct several practices at the agency.

End Regulation by Enforcement

Cordray was fond of failing to outline specific standards for assorted CFPB regulations. Instead, the agency under his watch seemed to enjoy offering the industry examples of regulation interpretation by taking legal action against lenders. Cordray explained his philosophy at a speech in 2016. He argued that it is the responsibility of the mortgage industry to determine what the actions of the CFPB means for the individual lender. Cordray said that mortgage lenders should look closely at their practices and fix whatever is not being done appropriately. But this leaves a lot to interpretation and can lead to paralysis in the industry.

Mortgage industry advocates argue a smarter policy is to simply be clear from the start what the regulations are, what is allowed and what is forbidden. The new CFPB director should make it a priority to state concrete rules about what is and what is not allowed when issuing mortgages.

Make It Easier for Small and Medium-Sized Lenders to Do Business

Critics charge that Cordray has created major problems for small and medium sized mortgage lenders. For instance, a court found in 2015 that the CFPB deprived a lender of its due process rights as it changed a long-standing interpretation of a law. It then fined the company a large amount for a breach of the new interpretation before the interpretation even existed as law.

Critics argue that no company in America should be treated in such a way by regulators. Under the previous director, the CFPB appealed a court ruling in the above matter. Hopefully, the new director will drop the case entirely.

There is more: Cordray’s record shows that he has engaged in executive overreach, opponents argue. He has found companies guilty of racial discrimination based upon mere guesses of people’s races by looking at last names. This resulted in compensation checks being mailed to white people for ‘discrimination.’ He also has tried to get around restrictions on the agency’s powers to regulate car loans and to put caps on interest rates for mortgage and car loans.

Hold the CFPB to High Standards

Critics of the bureau argue that the CFPB had a toxic culture from the start that encouraged discrimination against minorities and females. In 2014, the agency had to testify before Congress for alleged unequal treatment of Hispanics, African Americans, women and people over 40.

A 2016 report from the GAO stated that the CFPB had made progress, but 40% or more of black employees at the agency disagreed with the statement that career success at the bureau is based upon merit rather than favoritism.

Critics charge that the CFPB is highly hypocritical. After all, it is a federal government agency that has been charged with punishing discriminatory lending practices. Many say that new bureau leadership should work hard to change this so that the mortgage industry feels that it is being held to high standards by an agency that holds itself to the same standards.

Provide Congressional Oversight of the CFPB

The Dodd Frank Act allows the CFPB currently to work without oversight from Congress. This means that it is not really accountable to the voters. The agency gets its funding from the Department of the Treasury and not Congress. Mortgage industry professionals say that the Dodd Frank Act should be revised so that the CFPB is overseen by Congress.

Better Protect Consumer Data

The CFPB has information on more than 600 million credit accounts. This includes highly sensitive consumer information. A GAO audit in 2014 found there were many problems with how this data is protected from hackers. The GAO did note later that the agency had made progress with data loss prevention, but there is still much work to be done.

Critics note that the CFPB has been critical of Equifax due to data breaches recently that put consumer data at risk, but if the CFPB is hacked, consumers could be even worse off. The bureau has information on the types of loans you have, your payment history, arbitration case records, data from DMVs, information on overdraft fees and more.

CFPB Changes HMDA Data Collection &

The Consumer Finance Protection Buerau announced the agency was increasing the 2017 threshold of $44 million to $45 million for 2018. Thus, depository institutions with assets of $45 million or less as of December 31, 2017 will be exempt from collecting HMDA data in 2018.

CFPB Adjusts TILA Escrow Thresholds for Home Mortgages

Regulation Z, which implements TILA, requires creditors to establish an escrow account to pay property taxes and insurance premiums for specific higher-priced first mortgage liens. Read more on the new CFPB rules.

What You Need to Remember

The CFPB generally has made it harder for small and medium sized mortgage lenders to issue loans. This has hampered the housing and mortgage industry and the American economy as a whole. It is hoped that a more pro-business CFPB director will be able to safeguard consumer rights while allowing more mortgage loan activity.

]]>https://www.refiguide.org/new-cfpb-director-help-mortgage-industry/feed/03008How Much of a Home Can I Afford with a FHA Loan?https://www.refiguide.org/how-much-home-afford-fha-loan
https://www.refiguide.org/how-much-home-afford-fha-loan#respondThu, 21 Dec 2017 21:11:10 +0000https://www.refiguide.org/?p=2971Are you excited to buy a house in 2018? You may be able to afford a low rate FHA home loan program for several reasons. FHA home loans are insured by the Federal Housing Administration, and feature more flexible underwriting standards than conventional loans. FHA home loan requirements are easier than most conventional loans and… Read More »

]]>Are you excited to buy a house in 2018? You may be able to afford a low rate FHA home loan program for several reasons. FHA home loans are insured by the Federal Housing Administration, and feature more flexible underwriting standards than conventional loans. FHA home loan requirements are easier than most conventional loans and that’s why they are so popular with first time buyers who have past credit problems and who are seeking lower down payment options.

Home affordability is an essential component in buying your first house.

If someone suggest a FHA loan, you may be saying to yourself, how much can I afford with FHA and what are these mortgages are all about? These FHA mortgages have been helping renters become homeowners for over eight decades with competitive interest rates, low fees, low down-payment requirements and forgiving credit standards. Keep reading to learn more about the 2018 FHA requirements and basics of FHA home loans.

FHA Home Loan Requirements Are Obtainable

Most home owners today do not have the funds to put 20% down on a home. The cost of a home in many parts of the country is $300,000 or more. If people needed to put down 20%, very few of us could buy a home!

People turn to FHA house loans in part because they only require in many cases a mere 3.5% down payment. This allows millions of more people to be able to buy a home.

Many who want to buy a home choose FHA home loans because you can have a low credit score and still buy a home. For example, if you have at least a 580 FICO score, you will be able to usually get a home with only that 3.5% down payment.

With a low credit score, FHA home loans also give you access to low interest rates. These days, you might be able to score an interest rate on an FHA mortgage fixed for 30 years in the 4% range. You can get such a low rate because the loan is guaranteed by FHA. If you do not pay, FHA pays back the lender much of the loan.

We anticipate that 2018 will be a great year to buy a home with a FHA loan because of the affordability and easy credit qualifications.

Other Benefits of FHA Home Loans include:

Being able to get a FHA loan with no credit score. Who would think that you would be able to get a home loan without any credit? HUD does not allow FHA to not consider you for a loan because you do not have a credit score. It is possible to have nontraditional credit as the basis for a home loan, such as payments for rent, utility bills and cell phone bills.

Larger loan limits for higher priced areas. You might think if you want to buy a home in an expensive area that FHA would not insure the loan. However, FHA has different sizes of loans it will guarantee, depending upon the cost of real estate in that area. In a cheaper area such as Pittsburgh, you can get an FHA loan for a home up to $294,000. But in San Francisco, you may get a FHA max loan amount for a home that costs more than $700,000.

FHA home loans can be used for most property types. You can get a single-family home, a duplex or a triplex, or a condominium. Modular homes and manufactured houses may also be eligible.

You can assume an FHA home loan. An FHA mortgage may be assumed by a new buyer. This is a big advantage when interest rates are going up. It is possible to keep a much lower rate from years ago if you buy a home with an FHA loan in place. You do need to qualify for the FHA home loan, though.

You can do a streamline refinance with no appraisal if rates drop. If you have an FHA mortgage and want to get a lower rate, you can do an easy refinance with minimal checks of your income or credit.

How Much Home Can You Afford with FHA?

When you apply for a FHA mortgage, your lender will determine how much home you can afford by looking at your debt to income or DTI ratios. Lenders will calculate your DTIs so they can ensure that you have enough income to cover the mortgage as well as your other bills.

There are two DTIs that you need to understand so you know how much home you can afford on your income. The first is the front-end ratio. This is your expected monthly mortgage payment and all other costs that go with your mortgage payment.

The other is the back-end ratio. This is your total monthly housing payment plus all of your other installment loans, including student loans, credit card bills, car payments etc.

To determine how much home you can afford, your FHA mortgage company will look at these two aspects of your monthly income:

Front end DTI: The total amount of the monthly mortgage payment, real estate taxes, home owner’s insurance and real estate taxes cannot be more than 31% of your gross monthly income, in most cases. If you have a higher down payment or credit score, you may be able to have that percentage a bit higher.

It is possible in some cases to get approved for a DTI as high as 50% for some FHA home loan programs. But you will need a high credit score, a lot of savings, or at least a 10% down payment.

A FHA home loan is an excellent choice to buy a house for many Americans. FHA home loans are guaranteed by the Federal Housing Administration, which means that lenders are more likely to offer loans to people with lower incomes, lower credit and higher debt to income ratios than average.

While the FHA home loan program is a great deal for millions of Americans, there are certain restrictions you need to be aware of. One of the big ones is lending limits for loans that FHA will guarantee. FHA has maximum loan amounts for each state and for certain cities that are higher and lower than others. If you want to get approved for a FHA home loan, the home that you want must be within that limit for the area you are considering.

If you are interested in a home that is above the maximum limit for your area, you cannot get an FHA home loan. You will need to qualify for a conventional loan in that case. Or, you would bring more cash to the table so that you could qualify for the maximum FHA loan amount.

Other Limits on FHA Home Loans

The FHA mortgage also has other limits for the types of properties that it will insure. For example, the condition of the property is relevant as far as what will qualify for a FHA home loan. FHA will allow you to buy a house that needs rehab, but it will not insure houses that are in tear down condition.

Properties that have been foreclosed by FHA can become re-eligible for FHA. Typically, these homes should need less than $5,000 in repairs. A home that does not qualify for FHA backing usually needs more than $5,000 in repairs. It can be sold through HUD but it is not eligible for backing by FHA.

Note that the lender itself has the final say on whether a loan should be approved or not. But the appraiser’s opinion of the property is vital to the decision-making process by FHA. The lender may require that some of the deficiencies on the property be repaired before the loan is approved. For example, the approved FHA lender may mandate that the home is treated for termites if the appraiser determines that there is termite damage to the home that affects the soundness of the structure.

The home also could be rejected by FHA if it does not meet the guidelines related to the type of property it is. For instance, condo loans can only be made with a FHA home loan for complexes that are approved by HUD. The complexes that are eligible are listed on the HUD website. Manufactured homes also are held to certain standards. The manufactured home for example has to be permanently attached to its foundation.

FHA home loans are a very valuable option for many Americans. This type of loan allows you to get a home of your own instead of paying rent for years while waiting to qualify for a conventional loan with a higher credit score and down payment. However, you must make sure that the property does not go above the maximum amount for your area of the country.

The FHA home loan is an excellent product for people with lower credit scores and down payments. If you can keep your DTI to the parameters mentioned above, you may be able to buy your own home in 2018!

]]>https://www.refiguide.org/how-much-home-afford-fha-loan/feed/02971How Increased FHA Loan Limits in 2018 Help Home Buyers with Higher Max Loan Amountshttps://www.refiguide.org/fha-loan-limits-higher-max-loan-amounts
https://www.refiguide.org/fha-loan-limits-higher-max-loan-amounts#respondWed, 20 Dec 2017 01:15:47 +0000https://www.refiguide.org/?p=2952It appears that the housing market is growing strongly at the end of Trump’s first year in office, because the Federal Housing Administration (FHA) has announced that it will increase FHA loan limits in almost every part of the US in 2018. The new maximum FHA loan amounts for government insured-mortgages will take effect for… Read More »

]]>It appears that the housing market is growing strongly at the end of Trump’s first year in office, because the Federal Housing Administration (FHA) has announced that it will increase FHA loan limits in almost every part of the US in 2018. The new maximum FHA loan amounts for government insured-mortgages will take effect for all FHA home loans that are approved on or after Jan. 1, 2018.

How FHA Max Loan Amounts Are Set

The National Housing Act mandates the Dept. of Housing and Urban Development to set single-family loan limits at 115% of median house prices and the FHA county loan limits do vary by county. In 2018 high-cost areas will see a 150% raise in FHA loan limits across the board, with ceilings rising to $679,650. This ceiling increase is up from $636,150. The floor limits on FHA loans are set to rise to $294,515. This is an increase from 2017 in which the floor was set at $275,665. Did you know that there are only 223 counties that will not see 2018 FHA loan limits increased? Each year, FHA determines the mortgage limits for the next year according to Metropolitan Statistical Area and county.

In 2016, FHA boosted limits in only 188 counties. But in 2017, the number of counties with an increase went up to 2,948. In 2018, the number of counties that will see an FHA loan amount increase is 3011. This suggests that the housing market is gathering steam as home prices are continuing to climb. If the Department of Housing and Urban Development and Congress raised FHA max loan amounts signals the confidence our government has in the US economy and real estate sectors.

For 2018 in higher cost areas in California and New York, as well as others, the loan limit for FHA will be $679,650, which is an increase from $636,150 this year. For lower cost markets, the new loan limit will be $279,515. Below is a sampling of the 2018 FHA loan limits for FHA in cities across the country (FHA max loan amounts in various regions):

Seattle: $592,250 and $667,000

Los Angeles: $636,150 and $679,650

Denver: $493,350 and $529,000

Orlando: $277,150 and $294,515

Philadelphia: $379,500 and $385,250

Dallas: $362,250 and $386,400

Raleigh: $300,150 and $318,550

Why an Increase in FHA Loan Amounts is a Good Thing?

If you are looking at buying a home or getting a mortgage, you may see all of this news about increasing 2017 HUD loan limits and wonder why this is important. This is a good question.

The FHA loan is one of the most popular loans issued in the country today. The loan is not actually given by FHA; it is underwritten by FHA licensed mortgage companies. The loan is insured by the Federal Housing Administration, meaning if the borrower defaults, the FHA pays back the lender part of the principal. This is an important feature because it makes lenders more likely to issue loans to people without large down payments and who have past credit problems.

When HUD raises the FHA max loan amounts, this means that it will guarantee a larger loan amount for that year. As home prices continue to climb, this is necessary if people are going to be able to buy homes with a FHA mortgage product. In some parts of the country, there is serious economic growth going on which leads to higher home prices. If FHA does not increase its loan limits, many people with lower down-payments and credit problems will not be able to use these government home mortgages. The record-low FHA mortgage rates today will not last forever. At some point the Federal Reserve will be forced to raise key interest rates because of a roaring economy.

For them, they would have to probably try to get a conventional loan, which is harder to get in terms of down payment and credit score.

Higher FHA Loan Amounts Mean More Opportunities for First Time Home Buyers.

FHA Financing Requirements Are Reasonable and Flexible

These government-insured loans are popular because the standards to get approved are more flexible than conventional loans. First time buyers who have credit issues often can get approved with a low interest rate. The lender is able to provide a low interest rate in a big part because of the FHA guarantee.

These loans also are available with as low as a 3.5% down payment. This makes it so much easier to qualify for a home loan than if you need to put down 20% as with some conventional loans.

If you are applying for a home loan with FHA, you only need to have a credit score of 580 to get a loan with a 3.5% down payment. However, it is easier to get approved with a higher credit score. Most importantly, you should show a positive credit history for the past one or two years. FHA insured lenders understand having a past credit issue such as bankruptcy or foreclosure, but you will need to show that you have mostly recovered financially to be approved. See today’s credit score requirements on FHA loans.

You also will need to show that you have documented income that is high enough to afford the home. Further, you should have not had a bankruptcy in the last two years. Last, you should have steady employment for the past two years. Being self-employed is fine, but you will need to show a profit and loss statement and two years of tax returns to qualify.

Regarding debt to income ratios, you generally need to show that your monthly home payment will not be more than 31% of your gross monthly income. The lender also wants to see that your total debt load each month is not more than 41% of your gross monthly income. It doesn’t cost you any money to request a pre-approval on a FHA mortgage, so if you are serious about buying a house this year, than get pre-qualified now.

The bottom line on the increased FHA loan limits for 2018 is that the housing market across the country is improving considerably as home prices are continuing to rise. But interest rates are still under 4% for 30-year, fixed loans, so now is a very good time to get a loan with an experienced FHA-mortgage lender.

]]>https://www.refiguide.org/fha-loan-limits-higher-max-loan-amounts/feed/02952Update on HARP Refinance Loan Programs Extended in 2018https://www.refiguide.org/update-on-harp-refinance-loan-programs-extended-in-2018/
Mon, 18 Dec 2017 22:59:29 +0000https://www.refiguide.org/?p=2918The HARP refinance program was going to expire on September 30th. The Federal Housing Finance Agency announced recently that it would extend the Home Affordable Refinance Program or HARP 3.0 through the end of 2018. This is good news for people who are struggling with their mortgage and who owe more on their home than… Read More »

]]>The HARP refinance program was going to expire on September 30th. The Federal Housing Finance Agency announced recently that it would extend the Home Affordable Refinance Program or HARP 3.0 through the end of 2018. This is good news for people who are struggling with their mortgage and who owe more on their home than it is worth.

The HARP loan program was started in the heart of the mortgage meltdown in 2009. It was designed to help people who were either underwater on their mortgage or almost underwater to refinance. Under normal circumstances, it is impossible to refinance a home loan without equity in the property, and many of these home owners also suffered from bad credit, making the situation completely untenable under normal mortgage lending standards.

When FHFA confirmed they were extending the HARP 3.0 in 2018, thousands of homeowners with underwater mortgages breathed a sigh of relief.

Since 2009, HARP refinance program has been extended several times. It was first extended to the end of 2016, even though the FHFA director noted that the program could not go on forever. It then was extended until Sept. 30, 2017, with the idea to make a bridge to a new refi program that FHFA launched in October 2017.

However, FHFA has stated that it is extending HARP 3.0 again because of several changes to its high LTV streamlined refinance program. This was created for borrowers who are up to date on their current mortgage but cannot do a refinance because their LTV ratio is higher than the maximum limits of Fannie Mae and Freddie Mac. The FHFA has stated that it decided to extend the HARP refinance program to make sure that high LTV borrowers who were eligible for HARP would still be able to refinance.

FHFA has stated that 143,000 home owners may be able to still benefit by refinancing with a HARP mortgage.

Since the program was started, more than 3.4 million people have been able to refinance their home loan into a lower cost loan. For some people, this has allowed them to save their home.

Freddie Mac announced they issued some $22 billion of credit risk transfer bonds since 2013, but this is the first time the HARP refinance has been used as collateral.

HARP 3.0 Requirements

Are you eligible for HARP? To qualify for this program, your loan has to be owned by Fannie Mae or Freddie Mac; FHA loans do not qualify. The loan must have been closed before May 31, 2009. The loan to value or LTV has to be within 80% to 200%. This means if your home is valued at $100,000, you may not owe less than $80,000 or more than $200,000 to qualify for a HARP refinance.

The home must be your primary residence, a second home, or an investment property with one to four units. Also, you need to be current on your mortgage. For the HARP 3.0 program, you may not have any 30-day late payments in the last 180 days and only one in the last year.

Most lenders and banks would not consider the HARP, a mortgage for bad credit, but it is definitely one of of the few refi-options for people with less than perfect credit and no equity. So don’t consider the HARP as a ‘bad credit home refinance‘.

How Much Money Can You Save with a HARP Refinance?

If you are eligible for HARP 3.0, how much money can you save? This will depend upon the value of your home, your interest rate, and other factors, but here is a hypothetical scenario to give you an idea.

Let’s assume you bought your home in April 2009. Mortgage rates at that time were around 5% for a 30-year fixed loan. On a $200,000 home loan, if your rate was 5.125% and you could refinance to a rate of 4.125% now, you could save $120 per month and at least $43,000 over the life of the loan. Now, $120 per month is a lot of money for most people. So, with HARP refinance rates priced so competitively, it is definitely worth looking into.

Note that you still can be rejected for a HARP modification loan if you cannot demonstrate that you have sufficient documented income to pay the mortgage, or if your other debts are too high. A bad credit score may also lead to being turned down, but it will depend upon your other financial factors. The minimum credit score will depend on the HARP lender, but 620 is a common minimum score.

Find out the monthly payment now with the current HARP refinance rates.

Can the New HARP Refinance Program Help You?

We think that it can for many people. Some borrowers did get frustrated with earlier mortgage relief programs that they could not qualify for. But HARP loan program has been retooled several times and has had some obstacles removed to ensure that more people can qualify. The newest version of HARP 3.0 is expected to help thousands of underwater home owners to lower their monthly payments and hopefully save them from foreclosure.

One of the problems with the earlier versions of HARP was that it did not allow for a refinance for a borrower who owed more than 125% of what the property was worth. That limit was a major obstacle to many thousands of borrowers who bought their home at the height of the real estate boom and whose homes plunged in value during the crash. But HARP 3.0 now has removed that limit.

HARP refinancing now also has released the lender’s liability on the original note. This is a major incentive to get more lenders to embrace the Home Affordable Refinance Plan.

Even if you have a second mortgage, you still may be able to participate in the new HARP. This can lead to delays because the second mortgage lender has to sign off on the refinance and must agree to subordinate the loan to the first lien holder. But more lenders are signing off on current HARP refinances than ever before, so we think that this program will be a huge help to many people.

]]>29186 Steps to Get a Loan for a House in 2018https://www.refiguide.org/how-to-get-a-loan-for-a-house/
Sat, 09 Dec 2017 22:58:52 +0000https://www.refiguide.org/?p=2858Economic activity in the US is definitely on the rise. For all of 2017, it is likely that the US will have grown at a 3% rate or higher, which has not been seen for more than a decade. This means it is likely that home sales will grow in 2018. If you are one… Read More »

]]>Economic activity in the US is definitely on the rise. For all of 2017, it is likely that the US will have grown at a 3% rate or higher, which has not been seen for more than a decade. This means it is likely that home sales will grow in 2018. If you are one of the many Americans with more money in their pocket, below are some tips on how to get approved for house loan in 2018.

2018 will be a great time for first time home buyers to get approved for an affordable house loan as lenders continue to roll out attractive new financing opportunities.

#1 Save for a Down Payment

As more people are finding work and wages are rising, you should be focused on saving money for your down payment. But despite what many think, it is not necessary to have a 20% down payment to buy a home for many programs. While lending criteria did tighten after the mortgage crash of 2009, it is very possible to get a home loan in 2018 with far less than 20% down.

There are conventional loan programs backed by Fannie Mae and Freddie Mac that allow 3% down payments. It makes sense to spend a few minutes to determine how much you can afford with a FHA home loan. Also, the FHA has great loan programs that require only a 3% down payment. If you can get a gift from a relative, you can actually get into an FHA loan with zero down.

You do need to have acceptable credit to get a home loan in 2018. But good news – the definition of ‘acceptable credit’ has a very flexible definition these days!

One of the best options for getting a house loan in 2018 is the FHA finance loan. This program is guaranteed by the Federal Housing Administration. This matters because it means that if you do not pay the loan, the FHA will pay back the lender. Thus, the lender can allow people with lower credit scores to get approved for a home loan.

In 2018, the typical credit score for a borrower with an FHA loan was 686. The conventional home buyer had a credit score of 750.

The great news with FHA loan requirements are still lenient as you can have a score in 2018 as low as 500 technically and still get a home loan. To have a 3.5% down payment, you will need to have a FICO score of 580. If your score is below that, you need to have a 10% down payment. It will generally be harder to find a loan with a score under 580. So, your best bet for getting a home loan in 2018 is to get that credit score above 600.

#3 Have Savings in Reserve

Many lenders do not want you to empty your savings account to make your down payment and closing costs. They want often to see reserves, or assets that can be quickly sold so that you can make your house payments if you have an interruption in your income.

The lender will determine the minimum reserves they want to see for you to get approved for a home loan. While most home lenders today want to see some amount of cash reserves, it is possible to get an FHA loan with minimal cash reserves.

#4 Buy a Home You Can Afford

The old mentality in some corners was to buy as much home as they could afford under the theory that your income would rise as the years went by. However, after the mortgage meltdown, many financial advisers are more conservative in their recommendations. They argue today that it is more important to live within your financial means. You can move to a more expensive home when your income increases.

A good rule of thumb for buying a home in 2018 is that your debt obligations should not be more than 36% of your income before income taxes.

#5 Look at No Closing Cost Mortgages

Many home mortgages have $3,000 to $5,000 or more in closing costs. If you pay these fees out of pocket at closing, you will have a lower interest rate. But if you want to save money, you may consider a no closing cost mortgage. This will require you to pay a higher rate over the life of the loan, but it can be worth it for borrowers who want to save money out of pocket when they first buy a home.

Keep in mind that a no closing cost mortgage is often best for people who think they will sell the home within five or six years. You will be paying that higher mortgage interest rate for the entire life of the loan, after all.

#6 Keep Your Finances Predictable and Boring

In the year before you apply for a home loan, it is wise to keep your finances as steady and predictable as you can. You should try to stay in the same job, and don’t run up a lot of credit card debt or buy a new car while you are in the underwriting process.

Remember, just before you go to closing, the lender will run your credit again to ensure that your credit and finances are the same. So, you want to have everything look absolutely normal on those fronts.

Takeaway on Home Buying This Year

Getting a home loan in 2018 should be easier than ever. Just follow the above tips and you should be able to have a new home in the new year!

]]>2858What is a Jumbo Loan Amount?https://www.refiguide.org/what-is-jumbo-loan
Fri, 08 Dec 2017 20:46:18 +0000https://www.refiguide.org/?p=2847People who are shopping for a more expensive home, especially in a higher cost of living area, may consider a jumbo mortgage program. A jumbo loan is a type of mortgage where the amount is more than the conforming loan limits established by the FHA. So, unlike a conventional, conforming loan, it may not be… Read More »

]]>People who are shopping for a more expensive home, especially in a higher cost of living area, may consider a jumbo mortgage program. A jumbo loan is a type of mortgage where the amount is more than the conforming loan limits established by the FHA. So, unlike a conventional, conforming loan, it may not be purchased or guaranteed by Freddie Mac or Fannie Mae. Many economists are predicting a thriving housing market with home values predicted to soar in 2018 and 2019 and this suggests we may see a booming jumbo mortgage market. The current jumbo loan rates are some of the lowest we’ve seen in a long time, so there is plenty of opportunity.

Typically, high cost housing requires jumbo loan amounts. Find out if you need a conforming or jumbo home loan in your neighborhood.

The purpose of jumbo loans is to finance higher end homes and homes located in more expensive real estate markets. Jumbo loans are becoming more popular again in higher cost areas of the country as property values are rising.

A common question about jumbo mortgage loans is when it becomes larger than a conforming loan. It will vary by state and county, but FHA states currently that the limit for FHA properties in most of the country is $424,100. This means that a mortgage that is above that amount is a jumbo loan in most of the country. However, a jumbo loan in an expensive area, such as Los Angeles or San Francisco, is a loan that is above $636,150.

Here is a brief look at how these numbers affect the US housing market. There are 3143 counties in the US. Of all of those, 2916 have a loan limit of $424,100 in 2017. Just 108 counties have a limit of $636,150, and this includes New York City, Los Angeles, Orange County and San Francisco. Most of the high cost areas with the $636,150 conforming limit are based in California. Needless to say, jumbo loan programs are clearing important to the California housing market.

Also, there are 115 counties where the conforming loan limit is above $424,100 but lower than $636,150. Some of these counties are based in Connecticut, New Jersey, the Washington DC metro area and Boston.

Loan limits can be set even higher for counties in Hawaii; the limits there range from $636,150 to $721,000. Talk to a non-conforming mortgage lender today and find out what exactly equates to a jumbo loan amount in your region.

How to Qualify for a Jumbo Mortgage Loan

If you want to buy a home in the range of $500,000 or more, and you do not have the cash, you are probably going to need to get a jumbo mortgage loan. If you are trying to qualify, you will have tougher credit requirements. This is because a jumbo loan has a higher risk level for the lender. There is, if you recall, no guarantee from Fannie Mae or Freddie Mac that the lender will be paid back. And of course, the amount of the loan is high.

Lending requirements generally are higher than in past year, but we anticipate jumbo loan amounts to rise in 2018 as the housing market is forecasted to surge. To be approved for a jumbo home loan, you will need to have a credit score above 700 and expect to need a debt to income ratio of 43% or lower. Also, you will need to have some level of cash reserves and an acceptable income depending upon the lender.

Another requirement is to have pay stubs for the last 30 days and two years of tax returns. If you are self-employed, you will need to have 60 days of bank statements and two years of tax returns. Also, you will probably have to show you have the cash reserves to make six months of payments.

The amount that you can borrow depends upon how much money you have, your assets, credit score, and the value of the property.

Evaluating Jumbo Loan Rates Today

Jumbo loan interest rates typically have higher pricing than conventional home loans. This is because there is more risk with a higher-level loan and because it can take longer to sell an expensive home in the case of foreclosure. But the jumbo loan rates today have fallen much closer to conforming rate. For people with good credit, the rate for a jumbo home loan is often in range of what you can get with a conventional loan. In some rare instances, the jumbo mortgage rate might even be lower. But if you use a bank, you could pay 1% more for a jumbo loan.

Down Payments for Jumbo Loans

Down payment standards also have fallen in recent years for jumbo loans. At one time, lenders would require the borrower to put down at least 30%. But today, you may be able to get a jumbo loan with a 10% down payment. It makes sense to put more money down usually because you will not have to pay mortgage insurance, plus you will have a lower payment.

Who Should Get a Jumbo Loan in 2018?

Jumbo loans are usually for people who make between $250,000 and $500,000 per year. These types of people are known in the industry as high earners but not rich yet, or HENRY. They are people who have high incomes but do not yet have millions in cash reserves. These borrowers usually have the credit scores and incomes to qualify for these higher risk loans, even though they do not have millions in assets yet.

Tax Implications on Jumbo Mortgage Interest

Most home buyers can write off the interest on their mortgage payments. But for some jumbo loans, this write off is phased out. For mortgages that are above $1 million, you will not get the full tax deduction. For example, if you have a $2 million loan and have $60,000 of interest per year, you only can tax deduct $30,000 under current US tax law. So, you are only getting the tax break on the first part of your loan. It will be interesting to see if the GOP tax reform bill will continue to allow $1,000,000 mortgage interest deductions or if they will limit it to $500,000 as rumored.

A jumbo loan is a good option for the higher income borrower who has the credit score to qualify. It also is the only option for many borrowers in expensive parts of the country. Be prepared to need a higher credit score, income and down payment to qualify.